Investor · Houston, TX · Member since 2018 · 41 posts · 15 votes
Hello Bigger Pockets Family!
I am a long time listener trying to get my first property particularly single family rentals in the in and around Houston, woodlands, katy, pearland, etc.
Can yall provide any recommendation for commercial friendly bank? Also, since my LLC has no previous history how difficult would it be to secure a loan?
@Jon Dang Be aware that taking out a loan in your personal name and then subsequently transferring the property to your LLC (without first obtaining lender consent) can often trigger any Due on Sale language that might be in your loan docs. I would talk to a knowledgeable local real estate attorney before transferring any property to your LLC.
Typically if you are buying a SFR rental you will secure a loan under your personal name. A single family home is not considered a commercial property investment. You can transfer the deed to your LLC after the purchase if you are looking for liability protection.
@Jon Dang Be aware that taking out a loan in your personal name and then subsequently transferring the property to your LLC (without first obtaining lender consent) can often trigger any Due on Sale language that might be in your loan docs. I would talk to a knowledgeable local real estate attorney before transferring any property to your LLC.
@Stanley BronsteinI am aware of the due of sales. Guess I can re-phrase my question as how difficult is it to secure a commercial loan for single family homes. I plan to purchase property under my LLC.
@Tony Castronovo You mentioned “You can transfer the deed to your LLC after the purchase if you are looking for liability protection." Ignorance i purchase SFH under ny personal name and transfer to LLC is there a concern of triggering "Due of sale" and the bank calling the loan due. Also, do you know if banks ever work around the due of sale. I guess my concern isn't as you said SFH is not commercial thus a loan is difficult to secure. But, I am looking for protection against potential litigation. Thank you!
When it comes to loans what designates the loan residential or commercial is the fact that the loan is secured by residential and commercial real estate. Now changing the deed from you to your company just makes it a non-owner occupied loan but it's still a residential loan for properties 1-4 units, not a commercial loan. And Johnny Dang is correct in saying that transferring the deed to an LLC will expose you to the lender calling the loan due.
Yes, transferring the deed is likely to trigger the due on sale clause. It comes down to whether the lender wants to execute their right and call the loan due. Lenders are in the business of making loans and collecting interest. I don't see the incentive to force you to pay off your loan. And I think if you research you will find this to be the experience of most that have taken that risk. But yes, it is a risk and the lender could absolutely call the loan due. You could always transfer the deed back or refinance (both of course having their own inherent risks).