LLC Bank Loan - Chicago Naperville DuPage County Illinois
Hey Bigger Pockets!
My wife and I are purchasing our first rental property - creating an LLC. However, all the banks we've spoken to (national and community banks) do not allow us to get a loan under an LLC even if we put a personal guarantee assigned to it.
We do not want to get a loan under our own name and then transfer it to an LLC because the bank can then call the loan due immediately. Does this happen often and is there a way around this if we are not currently a cash buyer but are seeking a loan?
@Jason, are you speaking with the local community banks in your area on the commercial side even though this may be a residential investment? Ask to deal with VP on commercial side for loans for"investment" properties. Typically they will lend up to 70% with a DCR of 1.20> to an LLC.
Secondly, consult an experienced real estate attorney about the benefits of buying property in a land trust with the LLC as beneficiary to alleviate your concerns about the "due on sales" clause from lender.
Are you looking to finance this through a traditional 30 year fixed loan? If that's the case, it doesn't surprise me that they won't let you do it. However, if you apply for a commercial loan (will likely be limited to a 20 year amortization with a balloon after five or seven years), the LLC shouldn't be an issue. Just be sure you're talking to a commercial banker instead of a personal mortgage guy.
If you're looking for 30 year fixed, a conventional loan is your own name with the property titled in your personal name is the way to do it.
If you're willing to accept commercial terms (some combination of ARMs, balloons, and shorter fixed rate terms such as 15 years), then a portfolio lender may allow you to have properties in an LLC.
Forming LLCs and trusts and such is part of an asset protection strategy. If you have significant assets to protect, it would be worth consulting with an attorney experienced in that area to determine the best strategy for you. Umbrella liability insurance has a role in that, too.