Investor · Fishers, IN · Member since 2015 · 85 posts · 22 votes
Hi everyone.
I got a property with hard money, rehabbed, and then refi'd out using Quicken Loans. In the mist of trying to get out as quickly as possible before our hard money payments hit (they gave us 3 mo. period to get the house handled before payments would kick in) no discussion concerning LLC occurred with this lender.
I've now got an LLC established with my wife and I as members and have found out that they won't allow us to move the loan to be under the LLC. Here's what they said:
"If you were to transfer the loan into an LLC, this would go against the terms of the loan agreement, and would call the entire Note due. At this time, the loan cannot be transferred into an LLC."
That being the case, what good is our LLC? Can we still set up a bank account to handle all finances related to the property under the LLC? Our home owners insurance has the LLC and my own name listed on it, will this mortgage issue have any bearing on the insurance now?
Thanks for any insight as to what this messes up in the plan and what is of no consequence.
Investor · Boston, MA · Member since 2015 · 398 posts · 147 votes
9y
For your first few properties, the bank wouldn't lend to the LLC as it has no history. You have to get the loan in your name, and then quitclaim it after purchase into the LLC. You still owe the bank on the loan, but if a "lawyer situation" comes up you personally are protected as the LLC technically owns the building. If you have to refinance later you will need to quitclaim it back to your personal name first.
Investor · Avon, IN · Member since 2016 · 57 posts · 16 votes
9y
John,
I am from Avon, IN and am in your situation as well. I went to class, set up LLC, went to buy first property and found out that they wont lend to LLC. Found a second, went with Quicken and got the same answer. Found my THIRD, and have no cash, but lots of equity. Talked to investor friend and he suggested a commercial loan.
Working with a commercial loan officer at a bank in Frankfort, IN with an office in Fishers, IN and will be closing on my 3rd property, all will be moved to the LLC because the bank wants that, and I will not have any cash out of pocket to get the 3rd property.
There is some drawbacks but there was, as you and I found out, with going 'residential' mortgage route as well. I will be willing to share banking information.
Developer · Indianapolis, IN · Member since 2015 · 57 posts · 12 votes
9y
@Monti Harris thanks for sharing your information! I've found the same to be true. I've not yet formed LLC. Closing on property #2 next month and they'll be in my name until I pay them off. I'll transfer them to LLC once I have enough reserves to pay off notes if due on sale ever occurs. I'll add you as a connection. Good to know someone else on the west side of town!