Conventional financing using the LLC?

[Shane Moss]

I am looking to purchase my second rental property soon; however, this time I will need financing. My question is first, will my LLC have a problem getting financed since it doesn't really have a credit history? I do have a business credit card under the LLC's name, but I've only had it and the LLC since May of this year. Second, is it necessary to get financing through the LLC rather than myself because of potential future lawsuit issues?

Thanks for the help!

[Bill Walston]

Hi Shane! If you purchase the property in the name of the LLC, then the financing should be in the name of the LLC as well. This shouldn't be a problem, though you will most likely need to personally guarantee the loan.

[MANUEL VALBUENA]

this is interesting to me as well. I am about to do my first investment, and I guess i need to go to a Bank to find out these things. I will let you guys know next week what USBank tells me. BTW, did you close this deal? which way did you go? find any problems doing it?

[Jon Holdman]

If you can get financing in your LLC, it won't be conventional financing. By definition, "conventional" means it conforms to Fannie & Freddie's rules. Fannie at least won't buy loans made to LLCs or even on a property that's recently (6 month) belonged to an LLC. Unless something has recently changed.

You might get commercial financing. The rate may be a little higher, the term will almost certainly be shorter, and you will have to give a personal guarantee. Most banks won't do them. But a few will. You'll likely need to do some searching to find one that will finance you. Be persistent.

[Shane Moss]

I wish I could give you my experience on this, but I ended up just doing a refi w/ a cash out on my condo to come up with the funds. I felt like I'd get a better rate than getting a commerial loan as Jon mentioned. Besides, I plan on renting out my condo in a couple of years and needed to go to a 30 year instead of a 15 year to receive a positive cash flow.