Quick warning about financing properties held in Series LLCs

[Colin G Murphy]

Hi everyone

I recently moved a handful of rental properties into a Series LLC. I won´t go into the pros and cons of these entitles as they have been covered extensively in the BP Forums & Blogs.

However, as Greg Boots wrote in a BP article a few years ago, the idea behind the Series LLCs is a great one: put all similar assets into a Series LLC to cut down on costs of forming multiple LLCs to protect them. The flip side is that these are newer entitles and there isn´t a lot of case history of investors successfully defending their assets from creditors using a Series LLC.

I knew this when I formed them and was happy that the benefits outweighed the very low risk that I would get successfully sued by someone AND the local state courts would not recognise that my individual rental properties were legally segregated.

Unfortunately, not all specialist lenders are happy to accept that risk. For example, both B2R Finance & First Key Mortgage have policies of not financing Series LLCs. The brief feedback is that their legal departments won´t green light Series LLC applications because this is a new entity that hasn´t been fully tested in court yet. On the other land, Lima One Capital are happy to offer finance as long as the assets of the Series LLC are in the same state.

If you have been using the same lender for years and are considering forming a Series LLC, make sure you check that they are happy to finance them before diving in.

Finally, if anybody knows commercial lenders that offer competitive rates for long term rental property financing in Florida, please PM me as I´m shopping around for one!