Fort Lauderdale, FL · Member since 2014 · 23 posts · 2 votes
Hi guys. I am currently doing my homework on how to obtain a loan under an LLC for a property that I would like to buy and rent out. From what I have read on the BP forums on this topic it seems as if your best bet of achieving this is going through a smaller bank and not your typical larger national banks. Wondering if anyone in the south Florida real estate game has any suggestions on specific banks that may be more apt to work with me in achieving this. Thanks again for any input folks
Investor · Miami, FL · Member since 2015 · 21 posts · 8 votes
10y
It is a lot of what has been said but most banks I've talked with generally won't care much about it being in an LLC, as long as the personal guarantee is the same. To them, they still have the asset and you as lines of recourse. And yes, the smaller the bank the more likely they are to work with you. I would mention to them that you are looking to build a portfolio- a constant source of deals normally entices small banks.
I would think is the safer route, rather than holding the property under your name where you have liability from a number of different angles.
Likewise, if you are having trouble securing bank financing, you may want to look into a bridge loan, prove out the income for a year, and then circle back with a bank. Obviously, you don't want to have a high interest rate locked in, but if it is the only way to close on an otherwise good deal, the short term cost may be worth it. Just something to think about.
Boca Raton, FL · Member since 2015 · 6 posts · 1 vote
10y
Based on suggestions in the forum we googled local community banks in south florida and both that we spoke to seemed very open to the idea of buying in a personal name and then quit claiming the property into an LLC. Whilst legally this should trigger the sale purchase clause and put you in breach of contract, both of them admitted that the transfer is a common occurrence and not a big deal. YMMV!!
We are about to close on our first property, so we'll see what happens.
Fort Lauderdale, FL · Member since 2014 · 23 posts · 2 votes
10y
@Nick Howe thank you for the reply. Yes I've read that the only downside to doing it that way is the possibility of triggering the sale purchase clause, however as you said maybe it is more common than not. My I ask what specific banks you have had luck with? Thanks again and congrats on getting ready to close!
Rental Property Investor · Lindon, UT · Member since 2015 · 862 posts · 438 votes
10y
Ross, it all depends on your qualifications. If you qualify conventionally, any bank will use your income, credit and assets to get your loan completed. Smaller banks may be able to go quicker than larger banks currently. If you cannot qualify with income or credit, there are other options available with niche lenders and hard money lenders for the situation on an investment property.
Fort Lauderdale, FL · Member since 2014 · 23 posts · 2 votes
10y
@Darren Eady thanks man, I'm certainly beginning to learn that there are a number of different ways to go about this process. I appreciate your response
West Palm Beach, FL · Member since 2015 · 18 posts · 1 vote
10y
Ross Benedict ,, good information here , I am also in South Florida looking to purchase my first home. I was thinking of purchasing a home under my name and then switching it after. Any thoughts on this strategy?
Investor · Miami, FL · Member since 2015 · 21 posts · 8 votes
10y
It is a lot of what has been said but most banks I've talked with generally won't care much about it being in an LLC, as long as the personal guarantee is the same. To them, they still have the asset and you as lines of recourse. And yes, the smaller the bank the more likely they are to work with you. I would mention to them that you are looking to build a portfolio- a constant source of deals normally entices small banks.
I would think is the safer route, rather than holding the property under your name where you have liability from a number of different angles.
Likewise, if you are having trouble securing bank financing, you may want to look into a bridge loan, prove out the income for a year, and then circle back with a bank. Obviously, you don't want to have a high interest rate locked in, but if it is the only way to close on an otherwise good deal, the short term cost may be worth it. Just something to think about.
Real Estate Investor · Sunny Isles Beach, FL · Member since 2013 · 788 posts · 333 votes
10y
I'll second @Evan Demchick's suggestion - you may have an easier time doing the deal with hard money/private money/your own money, then after it's rented for a while any bank is much more likely to give you a loan. At that point, not only might you qualify personally, but the property is profitable, so the financing should come much more easily.
I haven't done any loans in Florida on buy and hold deals yet, so I can't recommend any banks unfortunately...But my buy & hold borrowers elsewhere always refi me out using small local banks, not the big guys.
If you need some hard money to make this happen, feel free to give me a call!
Real Estate Investor · Sunny Isles Beach, FL · Member since 2013 · 788 posts · 333 votes
10y
Also, I don't see why you would take the risk of buying it in your own name and moving it into an LLC later...If it's a matter of the bank only taking your personal financial situation into account if you do it in your own name, I'd personally rather use hard/private money to acquire it, then refi with a bank once the property financials stand on its own. I don't say this because I'm a HML, but because I just don't like the risk/liability of holding a rental property in my own name.
But again, I'm not in that business...Maybe someone who is can shed some light / give better advice...
Licensed Mortgage Lender · Fort Lauderdale, FL · Member since 2014 · 98 posts · 13 votes
10y
@Ross Benedict Depends how quickly you need to close and if you are prepared for the long wait times to ultimately close on the property. Remember, that the qualification process can take awhile, and the Seller may be prepared to even take a lower price if it means selling the property quicker. Large bank or even a community bank, you still have to qualify, and there's always going to be a layer of red tape involved. I would say it behooves you to close with a private source of cash (hard money lender, private lender, even a relative). Get that property in your name or your business name, then refinance. Sure, you'll spend a tad more in closing costs having to pay a settlement fee twice, however, at the end of the day you have the property, and not someone else.
I always suggest to our borrowers to buy the property in the name of an LLC, business entity or even land trust. Remember, if a property is in your personal name, you are not shielded from personal liability if you get sued for whatever reason. If the property is in your personal name, a plaintiff could go after any of your assets, including anything in your personal name.
Lender · Draper, UT · Member since 2015 · 74 posts · 25 votes
10y
There are a lot more private lenders offering bank competitive rates and terms for investment properties then there used to be! They move much faster than traditional banks and usually have fewer restrictions for qualifying. Even if the borrower doesn't have the best credit, as long as the property has good cash flow and down payment, they'll fund it.
Vendor · Brookline, MA · Member since 2017 · 12 posts · 1 vote
3y
Hi Ross
Aside from conventional loans there are a variety of alternative funding solutions such as hard money loans, crowdfunding, portfolio loans, local or community banks and private money loans. Each lender will have their own criteria but here are some tips for getting funding as an LLC…
Lenders will often require these documents:
Employer ID number (EIN)
Your LLC's operating agreement (the most important part is the list of owners and their percentage of ownership)
Income documentation for the business which would include bank account information
Information on any rental properties you may already have
The personal income, debt, and credit information on each member of the LLC
When you're getting funding under an LLC, bear in mind that personal guarantees or credit checks will also be required. So, it's advisable to get your credit score to 680 or above and keep your personal finances in good standing.
Make sure that you have enough cash not only for the down payment, but also to cover the costs of closing, origination fees, property taxes, insurance and so on. It’s also a good idea to build up your cash reserves, as lenders may ask for evidence of cash reserves to tide you over for 6 months or more. Aside from this, you may need to cover other costs like property repairs, maintenance and so on.
I think Evan and Lucas offered very good advice. Holding title in an LLC or Trust is always wise for asset protection and estate planning considerations. There are options for borrowing under an LLC or Trust name (with a personal guarantee), but you may not have the time needed for the underwriting, etc. process. Private lender is probably a good option if you need to act quickly and may not qualify under the institutional lending guidelines. Also, if you build a small portfolio, an institutional lender may be willing to later cross-collateralize the properties and offer more favorable financing using all the properties.
Specialist · NJ · Member since 2022 · 1k+ posts · 649 votes
3y
Primary banks won't lend to an LLC because an LLC shields the borrower from personal responsibility. HMLs will lend to an LLC because then it is considered a "commercial loan" that is a business to business loan. This keeps all those regulations and red tape away and makes the loans easier to obtain and close.
You definitely want to open an LLC, save money, and keep an eye on your credit.
This is all great info. But what if one will only create the LLC if the offer goes through on the property? Then is it wise to buy the home with cash , and then do a cash refinance or delayed financing under the name of the newly created LLC?