Financing arrangements to move a STR loan to an LLC

[Pamela Burke]

I see the debate between LLC or no LLC.....I already have one. My first property I bought with cash so there was no issue. I'm interested in some of the great options available with STR arrangements and would like to know how best to speak with financial institutions to create the option without loosing the down payment options or having a loan come due at transfer. Any advice?

Thanks in advance

[Luke Carl]

Are you asking what to do with a loan that is already closed? You need to contact the bank and ask for permission to quit claim to an LLC. It's very likely they'll say yes but you certainly want permission first.

If the loan hasn't closed and you're talking about conventional then you will not be able to use an LLC. You can if you use a local bank and a commercial loan.

[Nathan Gesner]

Quote from @Pamela Burke:

I see the debate between LLC or no LLC.....I already have one. My first property I bought with cash so there was no issue. I'm interested in some of the great options available with STR arrangements and would like to know how best to speak with financial institutions to create the option without loosing the down payment options or having a loan come due at transfer. Any advice?

Thanks in advance

I've been on this board for 12 years and haven't found a single person that had their loan called due when they transferred it to an LLC.

Call your bank and tell them what you want to do. They will tell you it will not trigger the "due on sale" clause and you have nothing to worry about.

[John Underwood]

If you're looking to do a new loan to buy another STR, then just have an honest conversation with them. Best not to hide what you're wanting to do.

Check around with different lending institutions till you find one that will work with you.

[John Carbone]

Quote from @Nathan Gesner:

Quote from @Pamela Burke:

I see the debate between LLC or no LLC.....I already have one. My first property I bought with cash so there was no issue. I'm interested in some of the great options available with STR arrangements and would like to know how best to speak with financial institutions to create the option without loosing the down payment options or having a loan come due at transfer. Any advice?

Thanks in advance

I've been on this board for 12 years and haven't found a single person that had their loan called due when they transferred it to an LLC.

Call your bank and tell them what you want to do. They will tell you it will not trigger the "due on sale" clause and you have nothing to worry about.

I’d still be careful with this. With interest rates so high, if someone has a very favorable locked in rate (sub 4 percent) banks may be looking for a reason to call a note, and doing it without permission certainly is a reason to call it.  I also wouldn’t call them, id get something in writing. I agree it’s extremely rare in general, but things have changed quickly and this isn’t a normal market now. 

[Andrew Street]

Everyone here has great points. Transparency with the bank will be your friend.

[Pamela Burke]

Thank you Luke Carl and Nathan G. for your input. Any lending institutions that have been good to work with that you would recommend for STR? I need to build a relationship to support my options. Thx

[Pamela Burke]

Appreciate all comments and input! 

[Nathan Gesner]

Quote from @John Carbone:

I’d still be careful with this. With interest rates so high, if someone has a very favorable locked in rate (sub 4 percent) banks may be looking for a reason to call a note, and doing it without permission certainly is a reason to call it.  I also wouldn’t call them, id get something in writing. I agree it’s extremely rare in general, but things have changed quickly and this isn’t a normal market now. 

Pure conjecture. Call your bank right now and then come back and let everyone know that I'm right. ;)

[John Carbone]

Quote from @Nathan Gesner:

Quote from @John Carbone:

I’d still be careful with this. With interest rates so high, if someone has a very favorable locked in rate (sub 4 percent) banks may be looking for a reason to call a note, and doing it without permission certainly is a reason to call it.  I also wouldn’t call them, id get something in writing. I agree it’s extremely rare in general, but things have changed quickly and this isn’t a normal market now. 

Pure conjecture. Call your bank right now and then come back and let everyone know that I'm right. ;)

Just because my bank would be fine doing it doesn’t mean there isn’t a scenario where a bank legally could and would do it. The whole point is if he gets it in writing from HIS bank then he won’t have a problem. Giving advice to someone to get something in writing is always sound advice.