Personal Loans and REI LLC

[Devon Fritz]

Hi all,

I currently hold personal mortgages for properties that are deeded to a sole ownership LLC. Ideally I would have the mortgages held by the LLC, but as most of you know, that would be a commercial loan and would result in higher interest rates. The question is 2-fold:

1. Besides the personal liability downside, are there any disadvantages to having a personal loan for LLC held REIs?

2. Does anyone have a HELOC or even secured commercial loans with their banks under their LLC?

[Bill Gulley]

As usual in finance threads, we can't get past a few posts until there is bad information. 

The due on sale is real and the solution is not always just to deed it back. A lender might accept that, but what assurance do they have you won't try it again in 3 or 6 months! So, no, it's also a character issue with a borrower. 

Same character issue applies trying to get a lower rate, this could take you to mortgage fraud through the loan application stage. If it is commercial, then do a non-owner occupied conventional loan, accept the risk and pay the rate, if your deal can't cash flow at the going rate, it's not a deal.

Providing a personal guarantee on your LLC note is not commingling funds, that is fine and most often required.

A "HELOC" is not a commercial loan, it's a consumer loan, but you can have a commercial line of credit secured by real estate, it's not a HELOC but a line of credit.

Get a HELOC, then quit claim it, in a short period of time will show intent, that's also intent as to bank fraud, lie about the use of funds, the use of collateral or your real intent is plain fraudulent.

That loan can be called due, in fact you need to read the terms of lines of credit type loans as they can cut funds off or call them due under a variety of circumstances, unlike a mortgage. 

I suggest you not play games with federally insured lenders! :)