Can I rent from my LLC in 2-Flat? + Get 2 hard money loans?

Question

I realize a lot of folks have posted this question, but it seems they're all for SFH's or for tax benefits that I'm not concerned with currently.

I live in an apartment on the south side of Chicago (2 bed 1 bath) and the 2-flat (2 units of 2 bed, 1 bath) one house down from me just came up for sale at a good price. I know the area well, know who's around, etc. and am thinking if I can find a way to finance this through my existing LLC that I'm currently doing a rehab on a separate SFH down the street with, it might make a lot of sense. I would rent one unit to myself, and then rent out the other to a regular tenant. This way my rent would be going towards my LLC owning a property, instead of to the landlord owning theirs. Is there something I'm missing there or a reason that wouldn't work?
The challenge for me, I think would be the financing. I already have one project going and was planning to do hard money to finish the construction, so I'd need another loan to purchase this one. I think I may be able to raise the capital to cover the downpayment and holding costs, but could I get another loan? I had been thinking to get hard money to acquire and do light fix up (it's in decent shape), and then refinance after getting myself and another renter in to season for 6-12 months. Or I could just get a purchase hard money straight out and manage the small fixes myself. Am I stretching?

Brian H. · Answer

@Jonathan Taylor You we’re correct, that’s what I meant. I see now, the loan isn’t the issue from the lenders perspective (I just talked to my hard money guy).

@John Warren I was planning to do the rehab/acquisition loan in order to immediately refinance (well, as soon as I could with whatever required seasoning). I agree, it’d be better with more of my own capital. Just seems like a very good deal, fits my requirements/model, and would make the rent im already paying benefit me/my company as opposed to someone else. So, it’s very tempting to try and make work.

Bob E. · Answer

@Brian H. Seems like you are making this more complicated than needs. Why not buy it in your own name as owner occupied and house hack it?

John Warren · Answer

@brian

@Brian H. I would wait until you have enough cash flow personally to do this. What you are looking to do sounds so complicated, and it is a house of cards. I also don't like the idea of purchasing a 2 unit with a hard money loan with the intent to hold for any period of time. Hard money is meant to be a bridge to help you get to the sale or to the refinance.

Jonathan Taylor · Answer

@Brian H. what I meant by that is, and correct me if I misunderstood, but if you are using an LLC and are under contract with one property and refinancing another, this is fine under the same LLC.

I was referring to your comment ' already have one project going and was planning to do hard money to finish the construction, so I'd need another loan to purchase this one. I think I may be able to raise the capital to cover the downpayment and holding costs, but could I get another loan? ' I thought you were asking if you can get another loan under the same LLC. The answer is yes but you would need the required funds for the new loan along with the standard qualifications needed for whatever loan you would obtain.

Brian H. · Answer

@Jonathan Taylor thanks, I knew there was something I was forgetting. What do you mean, by ‘clients have done multiple transactions under the same LLC?’

I have to do it under the LLC as that’s where my funding is coming through. Which is why @Bob E. I can’t buy it myself. If I could afford to do that I’d already have one 😁.

Jonathan Taylor · Answer

@Brian H. the issue you would have here is renting from yourself not the other projects you mentioned. DSCR and full doc lenders don't allow family or businesses you own as an acceptable renter so the rents cant be used. Clients have done multiple transactions under the same LLC without issue. DSCR lenders are the best bet for this transaction assuming you have 20% down. Just dont rent the unit under an LLC that you are connected with or own and make sure no family member is renting it either, that would kill your loan.

Can I rent from my LLC in 2-Flat? + Get 2 hard money loans?

Can I rent from my LLC in 2-Flat? + Get 2 hard money loans?

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