LLC or Individual for Hard Money

6 Replies

Hi All,

I am in the process of starting my first direct mail campaign and I am trying to secure funding partners should I get some responses. The initial hard money lenders I have spoken to seem to only want to lend to a company and not an individual, is this normal? It seems like a fair bit of work and time to get an LLC up and running before I have tested if my strategy will work.

Thanks

Scott

It really isn't that much work to setup an LLC. File your state's LLC paperwork along with the fee. Get an EIN from the IRS online (takes 5 minutes). Setup a new bank account for the LLC.

I guess my next question is, If I set up an LLC and buy the property with that, my plan is to then refinance the property again. Does that need to be refinanced in the LLC's name or my personal name?

Thanks

Scott

Closing in the name of an LLC is a distinction that hard money lenders use to avoid many laws and restrictions that would be imposed if it can be seen as a consumer loan. Hard money is typically a commercial loan on investment properties, and that is the crux of where the advantages are.

It is possible (depending on the state) to still be considered a hard money lender AND close in the name of an individual, but much less likely. Of course, I can't speak for every state or municipality - but to answer your question: Yes, it is normal.

Originally posted by @Kerry Boyle :

Closing in the name of an LLC is a distinction that hard money lenders use to avoid many laws and restrictions that would be imposed if it can be seen as a consumer loan. Hard money is typically a commercial loan on investment properties, and that is the crux of where the advantages are.

It is possible (depending on the state) to still be considered a hard money lender AND close in the name of an individual, but much less likely. Of course, I can't speak for every state or municipality - but to answer your question: Yes, it is normal.

Thanks Kerry! That explains the request then. I will look at setting up the LLC then.

I know of lenders that close in both, but they prefer the EL EL Si.  

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