buy propery with new llc

[David Russell]

How hard would it be to get financing for a property buying with a new LLC

[Scott Smith]

Getting financing for a new LLC may prove nearly impossible--particularly if there is no equity in the company. Financing terms for LLCs, even those with established equity, are typically far more costly than getting financing in your own name. But there is a way around this problem.

The first step is to get your financing in your personal name then use a land trust to execute any transfers into your LLC or Series LLC asset-holding company. Land trusts are viewed as estate planning tools [or an Inter Vivos Trust] and will not trigger the due-on-sale clause thanks to the St. Germain Act. They simply don't set off the same "alarm bells" at the bank that transfers to LLCs do. This has to do with the fact that land trusts are private documents, while most states require LLC membership to be reported on the public record with the Secretary of state. You can read more about this method of using land trusts to avoid due-on-sale issues from my previous BP article on the subject.

I have used this method personally and have seen many other investors do the same. None have even gotten a letter from the bank, to date. Barring a dramatic change in law, I would expect this method to help real estate investors avoid the "LLC lending problem" for the foreseeable future. Even if my entire analysis were wrong (it's not, I'm just playing out the worst-case-scenario for the excessively cautious), the very worst thing that could happen is that the property would revert back to your name. The bank won't force you to pay the entire loan in full without some time to "remedy" the situation. But even that is a worst-case scenario that I've literally never seen play out. Nor do I expect to. Land trusts have many asset protection benefits and can be a powerful addition to your asset protection plan anyway--yet this use is still not as widely known as it should be.