Purchasing Single Family Properties Through LLC’s?

Question

Hello all. I’ve heard it said by many that most banks will not lend to LLC’s when trying to buy single family homes. Are there any ways to navigate this?

Annchen Knodt · Answer

Hi @David White, it actually shouldn't be too hard to find a bank that will lend to an LLC on a SFH if you call around enough, but you'll find that the rate and terms will be less favorable than for a conventional loan to an individual (usually one percent or so higher interest rate and a 20 or 25 year amortization period rather than 30).  For that reason lots of people will purchase in their personal name and then transfer the deed over to the LLC once all the financing is in place.  Of course you'd want to talk to your attorney and lender before going that route!

Andrea Weule · Answer

I have all my rentals in LLC's.  I did have to find small local banks or credit unions for the loan to the LLC though. Many of the bigger banks want to put you in the Fannie Freddie bucket and that doesn't work for an LLC.  I do believe that US Bank is pretty open as a big bank to portfolio loans.

I'd start out by asking your local REI club and other investors who they use.  Then I often go to the yellow pages in the market (sort in alphabetical order) and see who has less than 3 branches in your area.  Start calling and see if any of them offer in house loans.  That's how I found most of my banks and credit unions.

Best of Success!

Andreas Schneider · Answer

Of course you already have a ton of good advise on this thread but i am going through this right now again. I agree with the terms being more favorable when acquiring a property under your name. However what i am doing is that as soon as i close on a property i then ask the title company to change it to my LLC (asset protection obviously) which they usually do for very cheap.

It is a case by case basis and of course depends what your goal is and what the calculations allow for a higher % on interest vs later cost to transfer into an LLC etc.

Paul Shannon · Answer

Your local community portfolio lenders, credit unions would be good.  Also national players Lima One Capital, Corevest, Visio all lend to LLCs.

David White · Answer

@Andrea Weule Thank you!

David White · Answer

@Brett Peters makes sense! Thank you.

Brett Peters · Answer

The truth behind this is that "Residential" Lenders cannot lend to LLC's. You would have to find a lender who does "Commercial" lending, the transaction itself is commercial but not the property. Certain lenders can only work with what their license allows. This is why if you attempt to do the same deal with a residential lender, they will try to convince you of the virtues of not using an LLC. Just shop around, you will find one quicker than you may think.

John Williams · Answer

@Andreas Schneider, I've heard others discuss this approach (securing the property in your personal name and then transferring the deed to an LLC). However, I have two questions.

Some people have indicating that transferring the deed to an LLC can lead to the bank calling the loan. Have you heard of that / does it concern you?

It seems that purchasing the property 'personally' and then transferring it to an LLC might be considered a 'piercing of the corporate viel', thus eliminating any limited liability protection the LLC would've otherwise provided. Thoughts?

David White · Answer

@Andreas Schneider Great point on the title company aspect. I’ll look into that as well!

David White · Answer

@Paul Shannon Thank you!

Purchasing Single Family Properties Through LLC’s?

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