BP Lenders: Add myself as co-borrower with my LLC?

14 Replies

Two questions:

Assuming my credit qualifies and the SFR property cash flows at an acceptable level:

1. Would it be advantageous for loan qualification purposes to become a co-borrower on a mortgage with my LLC (as opposed to a guarantor)?

2. Are there lenders that would do 80% or higher LTV on 30 yr fixed mortgages with my LLC and myself as either a personal guarantor or a co-borrower on the loan?

Thank you very much!

Any loan to an LLC is likely to be a commercial loan. Interest will be higher and they normally come with balloon payments. If you qualify anyway, you would probably be better off just getting conventional loan in your own name.

Another concern is that co-borrowing with an LLC could be the equivalent of co-mingling funds, so you run the risk of making the LLC useless anyway. I'd check with your attorney.

@Kiley Nakamura Unless your LLC has an established history, a lender is not going to be willing to underwrite in LLC name. What is more typical is you being the guarantor on the loan and title being held in LLC name.

@Greg Scott : I am specifically concerned with building business credit history for my LLC. I understand there are asset-based lenders with terms approximating a conventional mortgage (plus points and/or higher rates). At this point I am not very much concerned with the LLC for asset protection as I am for establishing business history.

You are absolutely right that I should check with an attorney on this, just thought I'd ask the BP universe as well.  

Appreciate it Greg!

@Upen Patel : So, if I am reading into this correctly, there is no real benefit to being a co-borrower as opposed to a guarantor on the LLC loan. Is this correct?

Thanks Upen!

@Kiley Nakamura

A bigger question is why is it so important to build an LLC line of credit?

I recall hearing a lot of gurus talking about that about 10 years ago.  I looked into that for a few months.  While I've always had good credit, I found it was far easier to grow my own debt-carrying ability by growing my income than it was to try to build a business line of credit.

@Greg Scott : No need for a business line of credit at this point.  That may be something I will look for down the line though once I have established a profitable history.  I am more at the starting point right now.  I haven't been in the game long enough to know what the gurus were talking about 10 years ago.  

Point taken about it being easier to grow things personally.  We generally have all that work history to back us up.  I'm looking for a good way to start that process up through an entity.  

Thanks Greg!

I have been notified that I was mentioned in this thread by @Ryan Murdock but I cant see the post.  Anyone else have this or is it just me?

Originally posted by @Kiley Nakamura :

I have been notified that I was mentioned in this thread by @Ryan Murdock but I cant see the post.  Anyone else have this or is it just me?

 I did respond but then decided to delete it....sorry for the confusion.

Originally posted by @Ryan Murdock :
Originally posted by @Kiley Nakamura:

I have been notified that I was mentioned in this thread by @Ryan Murdock but I cant see the post.  Anyone else have this or is it just me?

 I did respond but then decided to delete it....sorry for the confusion.

 No problem, just my lack of experience with these mentions.  Please feel free to PM me as any guidance would be appreciated.  Thanks!

I am trying to do something similar and have found out, the hard way, what other members are saying. Getting a loan in your name or other partner names, is much easier than for the LLC and cheaper. In fact a BP member here (Lender) gave me bad advice to put the lots we bought into an LLC. He even gave me a pre-approval letter to fund the loans and then withdrew his approval after I purchased the lots into the LLC. Now I have to transfer the lots into individual names paying the transfer fees again. Lost money and time ;( Be careful and talk to several lenders/banks.

@Barry B. : Tough luck on that lender pulling out on your deal, that sounds like someone to avoid altogether. I understand the simplicity of acquiring properties personally but I have specific reasons for using the LLC that have nothing to do with asset protection. I like your advice about speaking to many parties before taking action.

Thank you for sharing your experience, it is not always easy to do but it is very helpful to new investors like myself. 

@ Barry B.:  I would suggest checking with your tax accountant before retitling your properties to yourself.  I believe that while it's no taxable event to transfer your title into your Entity, transferring your property title out of your entity back to you may cause you to get taxed for the balance of the loan or at least the principle part.  Saw this recently, please verify with your accountant.

@Kiley Nakamura

I'll add myself to add to the chorus of those who say consult an attorney on the LLC vs personal money, but I'll also say check with a few attorneys. Some interpret local laws differently than others and an investor friendly attorney may be more likely to give you the specific route to take rather than just a general idea. We work with an attorney in Maryland that asks questions, gives her opinion and then she provides a solid path to take. Also, laws are specific to the state you're in and Hawaii has some quirks that we mainlanders don't even think about (like lava fields), so be sure to take any specific advice with a grain of salt.

Best of luck

Stephanie

@Stephanie Potter :  I certainly will be consulting an attorney on this.  Sounds like you have a good relationship with yours and I will be needing to find/build one of my own as well.  

Thanks for the advice!

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