Hard Money Lender says I need an LLC

[Jim Sestito]

Hi Guys,

I have a property I am trying to acquire through a hard money loan.

The company - who I got off the biggerpockets hard money link RCN Capital - was very helpful but did mention I would need an LLC in place in order for them to rent to me.

Is this the norm as far as hard money goes? And I will search the BP forums for info on setting an LLC but does anyone have a quick and dirty rundown for Massachusetts?

Thank you

[Shaun Reilly]

If you want to go the Hard Money route you will probably need to get an LLC (or some other business entity) for most lenders. They can all have their own rules but it is pretty common that they only want to lend to entities.

Quick and Dirty: Most consumer rights and foreclosure protections from things like the Dud-Fart Act pertain to residential mortgages and occupants. So if things go to hell and you move into your flip and say you had always intended to live in it the HML could get screwed. If you buy it with an LLC or Corporation it is a lot harder to claim you were ignorant of it being a commercial loan. So mostly a CYA thing for them.

BTW don't think just because they loan to your business they won't have you sign a personal guarantee for the loan as well.