LLC formation and loan

[Chelsea Allen]

Hi there. I am currently doing my homework on how to obtain a loan under an LLC for an investment property that I would like to buy and rent out in north Florida. Any suggestions on specific banks that may be more apt to work with me in achieving this? Also I would want to put the property under an LLC but would only form the LLC if I buy the property (if that makes sense) so it's a catch 22.

Can I get a loan under my own name and then transfer it to the LLC? Or pay cash and then refi under an LLC ?

What makes most sense ? 

[Stuart Udis]

@Chelsea Allen You raise two items here:

1. Banks are going to look at you to serve as a personal guarantor, even if the property is purchased in an LLC. Therefore, its your balance sheet/credit worthiness combined with the real estate (banks collateral) that will be considered in extending financing, not the LLC. Most focus too much on the LLC, but its the guarantor and the real estate that are the critical elements to underwriting.

2. The issue with purchasing the property and then transferring the property into an LLC are the added transactional costs. It may impact the loan and will require you to pay transfer taxes based on the assessed value, deed prep and some additional accounting fees to address basis. If you know you are going to purchase investment real estate, why not just create the LLC? If you are on the fence with respect to purchasing real estate, then you can always add language in the sales agreement permitting the assignment to an entity you will create for the purchase the real estate. This way, once you get a property under contract and are through with your dilligence, you can form the entity which can be done in a matter of days if not quicker depending on the state and whether you pay expedited fees if available. This may be your best bet as it lets you hold off on formation, but its important to make the title company and the lender aware ahead of time so they can update title and prepare the loan docs with the correct entity name.