Developer · Fort Myers Beach, FL · Member since 2018 · 383 posts · 195 votes
Hey there!
My business partner and I are purchasing an investment property that is a 4-plex. We would like to put the property in an LLC but are having a hard time getting a lender who would vest the LLC. Ideally we'd like to put 20-25% down with the LLC holding title and the mortgage. Is that possible and any suggestions on which lenders could do that?
I'm also in NJ. Let me know if you ever need a bank recommendation. Currently for commercial loans in NJ I'm getting properties deeded to the LLC, personally guaranteed by me. 5-6% rates, 25% down, 25 year loan term with 25 year amortization, rate adjusts every 5 years to the 5 year treasury rate +3%.
There is also a bank up your way called Provident Bank that will loan to LLC's for 1-4 family properties, rates around 5% and 30 years fixed.
@Kristi Kandel, having the LLC hold the title shouldn't be too tough, but without a good business record, you'll have to personally guarantee the debt.
A few years down the line, with good success and a strong lender relationship, you may be able to get a note in the LLC's name, but until you move into 5+ unit properties, that's very unlikely.
@Jaysen Medhurst great thank you. The 4 units and the new LLC does seem to make it so that the LLC would need to be personally guaranteed. I just need to check with legal to make sure the LLC still provided the same protection if we are personally guaranteeing the loan.
@Kristi Kandel I deal with this all the time in NJ, it's very hard to get lenders to lend to an LLC with out a personal guarantee, with that said, if the lender needs your name on the title as well then its the old saying, the owner always gets sued. I have 5 properties I put into land trusts with personal mortgages and made the LLC the beneficiary, but I heard that has even been pierced before when it comes to liability. So even though I have business and property insurance, I still keep a 5 mil personal umbrella..... I have a mixed bag some properties in LLC and some not....
@Kristi Kandel sorry I should have mentioned that, at the time of titling if I was a guarantee on the loan I needed to be on the deed. 3 properties I mortgaged this year I need to be on title with my LLC, which looks bizarre and defeats the purpose. I found one lender that would give a true LLC loan and they wanted 50% down...ouch.... I am out of FHA mortgages so I have to play the refi/payoff game as I find new properties....
@Robert Kentos ok so then the lenders are going to defeat the purpose of the LLC protection... How does it work on commercial loans then? Commercial properties are in LLCs most of the time...
My experience with commercial loans in NJ, has been no personal guarantee, because the lender looks mostly at the income potential of the property vs. the business (LLC) or even the owners personal credit/assets... Chances are if its commercial its the business only, that has been my exp.
You can get a commercial loan, 5-10 year balloon, you can Not get a conventional loan, 30 year term with no ballon, in an llc name. Never heard of “having to add personal name along with llc on title” to get a loan.
@Wayne Brooks yeah it seems like conventional loans for the 4 plex are on the border. Chase says 25% down and the only way to vest the LLC is with a jumbo loan. However the property purchase price is less than the jumbo loan limit. Seems that Wells Fargo might vest an LLC with a conventional loan.
@Kristi Kandel No, WF nor anyone else can give a conventional loan to an llc, period.....it is Fannie/Freddie guidelines, not the lender’s choice.....common knoedge. Sometimes the loan officer is just incompetent or not paying attention.
BTW, most people don’t realize it but loan officers at nat’l banks don’t even have to have a mortgage license, they operate under the bank.
I'm also in NJ. Let me know if you ever need a bank recommendation. Currently for commercial loans in NJ I'm getting properties deeded to the LLC, personally guaranteed by me. 5-6% rates, 25% down, 25 year loan term with 25 year amortization, rate adjusts every 5 years to the 5 year treasury rate +3%.
There is also a bank up your way called Provident Bank that will loan to LLC's for 1-4 family properties, rates around 5% and 30 years fixed.
@Chris Connery, Thank you for this information, I have been looking for financing with many dead ends. What bank would you recommend in NJ that works with loose credit scores but large assets and liquid....This has been my problem, plenty of cash on hand, in the middle of buying another 4 plex w/ 25% down and still get jamb up on financing... I currently have 5 mortgages....
@Kristi Kandel. Most lenders while dealing with 4 units or less (residential) will never want to do a loan to a llc without a personal guarantee, which I’m pretty sure defeats any purpose of liability perfection and llc have no tax benefits
I would go with a commercial loan obviously. 1st colonial community bank and American Heritage Federal Credit Union we’re both good. I don’t think either of them even ran me or my partners credit scores.
Hi @Chris Connery look like a lot of your answers actually are in line with what I'm searching about. I recently formed an LLC with 2 other members for REI buy and hold. We're just starting out and trying to find a lender we can build a long term relationship with as we grow and accumulate more properties. For now we're starting off with SFH, but want to eventually get into multiplexes and commercial properties at some point.
I saw some of your recommendations, was curious if you had a go-to lender for starting off. We're in Middlesex County.