Purchasing property using LLC as purchaser?

[Kyle Brinks]

Friends,

I am currently purchasing a rental property using a personal mortgage. My lawyer has told me that i can buy this loan using an LLC as long as i sign a personal guarantee with the bank guaranteeing the loan with my assets.

However my lender has told me that Fannie and Freddie wont let me do this and that is only possible to do this on a portfolio loan. He also told me that what I can do is go through with the current loan using my name and use a quick claim deed to transfer title after I close.

So, who is right? My lawyer that says I can do buy using my LLC with a personal guarantee or my lender who says I cant and have to wait until after closing to transfer?

[Anish Patel]

@Kyle Brinks Not a lawyer or a lender, but I'm sure each could be right to a degree. A lender that sells to the open market and doesn't keep the loan, probably won't give you a traditional mortgage in the LLC. A local bank that keeps the loan in house may. Someone suggested to me once that keep it in your name for the rate and term of a traditional mortgage and buy additional insurance for protection. Not 100% sure but transferring the title to the LLC may be a violation of your mortgage, but that is a legal question for a lawyer. I do however think you should run the numbers for your rental as a business loan and see if it will make the test. I like to use 5% and 20 yr and try to achieve a 1.2 debt service coverage ratio. If it won't make sense with those numbers it may not be that great of a buy. Don't forget the management fee too!