Forming an LLC / Corporation - to qualify for hard money

6 Replies

I recently reached out to a few different hard money lenders to see what kind of loans I could get, only to find out that almost all of them only offer lending programs to LLC's or corporations. Has anyone else ran into this issue? If so, I would love to hear how some of you have formed your LLC's. Any website or services used that were beneficial in creating your LLC or corporation? Thanks in advance!

Hi Jimmy, hard money lenders will only lend to an entity, such as an LLC. I would recommend you contact a local attorney to ensure that your LLC is set up properly. Otherwise, you can try to do it yourself on your state's website, but it may end up costing more if you don't do it the right way.

@Jimmy Jefferson There are "commercial" lenders out there that offer "hard money" style financing that allow you to vest in your personal name. What I mean by "hard money" style is that it's a 12 month term with interest only payments and includes high leverage on purchase + rehab without personal income verification. All the perks of hard money without quite as high of costs. You can call it whatever you want but a LLC is not an absolute requirement.

@Dan Barli thanks for the info. I've heard LegalZoom is a good online option to set up an LLC. I'll probably look into them and also keep in mind I may need to talk to a local attorney.

@Alex Bekeza thanks for that info! Do you have any names of specific "commercial" lenders that offer hard money loans like you're talking about? So far, every single hard money lender I've spoken with has told me I need to set up an LLC first.

Hi @Jimmy Jefferson Part of the reason is going to be state-specific. In most states, you need a lending license and are heavily regulated if you lend to individuals, but if the loan is "commercial" in nature, fewer require licensing as there is "no public to protect". If you are investing, you probably want to form an entity anyway. I hope that helps. 

@Doug Smith thanks for the info. The issue I see with forming an LLC however is that if I want to refinance with a local bank, then it would need to be a commercial loan which has higher interest rates and more money down requirements. I could purchase the property under my LLC then transfer the title to me as an individual but then I would end up paying a 2% transfer tax (per my local title company).