LLC funding for first property

[Adam Frantz]

I know that there have been a lot of posts about whether or not to use an LLC or not for REI. This is not a post about that. We have settled on doing an LLC. However, I have heard a few times on the podcast and in books that banks prefer to loan to individuals rather than LLC's in the beginning because the LLC has not yet established cashflow. So, this may make finding a lender a little more challenging that if we just found one for ourselves without our LLC.

So, my question is, if we transfer money from our refinance into our newly formed LLC, would that make our LLC more attractive to a lender for a first time REI investment? We would prefer not to risk the bank calling on our loan by buying properties in our name and transferring them into the LLC from the Due on Sale clause.

Thanks

[Dave Spooner]

@Adam Frantz Jody got it right from my experience - your best bet is to purchase it yourself and then transfer it into your LLC to start establishing cash flow. The bank will also look pretty carefully at the cash flow they expect the property to produce, even moreso than a bank lending just to you would.

I would also be surprised if a bank did not require you to personally guarantee the loan.

When we bought our first property, we purchased it in our name then transferred it to the LLC we had created. We're just getting to enough cash flow to seriously start considering buying through our LLC without a huge disadvantage or difficulty.