Hard Money asking for Loan to be in an LLC

Private Lending & Conventional Mortgage Advice
6yFollow

Hard Money asking for Loan to be in an LLC

Lucia Rushton
Realtor · Dallas - Fort Worth Metroplex, TX · Member since 2016 · 1k+ posts · 925 votes

A Hard Money Lender is asking for:

a new investor to put the title in an LLC

and says it will take 3-4 days once they receive the Appraisal back.

For the HMLs on here and those who've used HM, have you experienced this? Any guidance or feedback is appreciated.

0Reply
15 views

Most Popular Reply

Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
6y

Most require title be in an llc since they can not legally lend yo an owner occupant...an llc prevents the possibility of this. 

2Reply
See this reply in the discussion

11 Replies

Jump to latestLatest
  • Jon K.
    Rental Property Investor · Perry Hall, MD · Member since 2016 · 586 posts · 598 votes
    6y

    I have borrowed money from a HML that required title in an LLC, but an appraisal? What HML does appraisals? The whole point is to pay more so that they're fast and less of a hassle. That's the part I'd be concerned with.

    I can't speak intelligently about why some HMLs require the title to be in an LLC but speculate that it has to do something with lending regulations and being a commercial lender? Just a guess.

    1Reply
  • Kyle J.
    Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
    6y

    @Lucia Rushton There's so many hard money lenders out there, and each can have their own requirements. However, of the ones I'm familiar with, it is common for them to prefer to lend to LLC's (though some will lend to individuals) and to require appraisals.

    1Reply
  • Matt Rosen
    Lender · Honolulu, HI · Member since 2008 · 166 posts · 46 votes
    6y

    Hi @Lucia Rushton we are always asking for the borrower to purchase the investment deal within there LLC or business entity. And most hard money lenders will require this before closing.

    When they said it will take 3-4 days once they receive the appraisal back, are they referring closing timelines? 

    Thanks

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    6y

    Most require title be in an llc since they can not legally lend yo an owner occupant...an llc prevents the possibility of this. 

    2Reply
  • Lucia Rushton
    OP
    Realtor · Dallas - Fort Worth Metroplex, TX · Member since 2016 · 1k+ posts · 925 votes
    6y

    @Matt Rosen yes the HML closing time between appraisal and closing at title.

    0Reply
  • Jon K.
    Rental Property Investor · Perry Hall, MD · Member since 2016 · 586 posts · 598 votes
    6y

    @Matt Rosen Do you require an appraisal though? I've only borrowed from 2 HMLs at this point and neither of them asked for this. I wouldn't see the point of using a hard money lender that did require the appraisal.

    1Reply
  • Nick C.
    Investor · Tampa, FL · Member since 2011 · 2k+ posts · 3k+ votes
    6y

    I know the bigger institutional HMLs require an appraisal. You're better off with a local HML that knows the values of the neighborhoods, and doesn't have these kind of delays.

    0Reply
  • Matt Rosen
    Lender · Honolulu, HI · Member since 2008 · 166 posts · 46 votes
    6y

    Hi @Jon K. yes we always require an appraisal on every property whether its a fix/flip, construction or long term hold, refi, etc.  This does not mean that the final decision is solely based on the valuation provided but HMLs' need it for compliancy. 

    Hope this helps

    1Reply
  • Nagendran Manidas
    Investor · Austin · Member since 2020 · 15 posts · 1 vote
    6y

    @Lucia Rushton 

    If the property title is with the LLC for HML loan, how do you refinance out when you are done with the rehab? deed out to the individual and refinance using conventional lender?

    1Reply
  • Ryan BlakePro Member
    Lender · TX · Member since 2018 · 936 posts · 713 votes
    6y

    @Nagendran Manidas This is a much bigger issue than most people realize. That is why it is nice to have the option to close in your personal name. My guess is most people using the HMLs that require the LLC are not refinancing or have established the LLC enough to get a commercial line of credit with or without a personal guarantee. @Wayne Brooks

    @Wayne Brooks is correct as to why many lenders will prefer the LLC, to keep it from being owner occupied. The companies that do not require an LLC will normally make you sign a document at closing stating that you will not owner occupy so that it can mostly absolve the HML of liability if you choose to break your word and move in.

    [email protected]214-420-7324
    1Reply
  • Kyle MccawBusiness Member
    Property Manager · Keller, TX · Member since 2011 · 1k+ posts · 1k+ votes
    5y

    @Lucia Rushton yes completely normal. Not all lenders require the LLC. But like @Ryan Blake mentioned it protects the lender from having difficulty foreclosing if things go South.

    McCaw Property Management4.4902 Reviews
    WebsiteView Page
    2Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free