Personal or Commercial Loan

[Christina Arango]

Hi everyone,

I've been calling/visiting banks in my area to decide where I feel comfortable.  I am a newbie investor getting ready to purchase our first rental properties (I'm hoping to buy 2 this year and 2 per year hereafter, assuming I get along with this business).  We are looking to diversify our income-producing investment holdings.

I've read the articles about forming an LLC, and we have decided to do that since we have quite a few assets that we want to protect.

Today I talked to a loan officer that told me that I could easily transfer the title over to my LLC after signing a personal loan and that the bank would probably never find out. But then he also suggested that I look into commercial loans if I want my LLC to hold the loan, and assured me that they lend amounts as little as $20k up to the really big numbers. He also mentioned that I might be able to secure a line of credit that I could use at my discretion.

So, my question:  Should I try to go the commercial loan route or wait until I have a few properties to explore that avenue?  From what I've read the downsides to commercial loads are: larger down payments, higher interest rates and shorter terms.  Anything else?

Thanks for any advice that you can offer.

[Michael Wentzel]

@Christina Arango

I would get all the properties on to "personal" 30-year fixed loans that you can. Most banks will do four. Some will go up to ten with stricter guidelines. After ten, you would be forced to look at commercial loans if you want to keep acquiring. I have a regional bank I am working with and they have done 5 commercial loans for me and have been great to work with. The bad part is that after five years I need to pay them off or refinance. That is a big risk that I would rather not have over my head.

Mike