Can a non LLC qualify for hard money?

Question

Can people using their own names instead of an LLC to qualify for a hard money loan, or do you have to have an LLC to get hard money?

I am still very new & learning many new things.  One of the things I constantly see is that "cash buyers" tend to have a leg up on buying homes since they can close quicker & in some cases may get a lower offer.  I have also started to browse through the hard money lenders here on BP, & from what i have seen so far, all of them have required an LLC to be able to qualify.  Am I limited to more traditional bank financing until I start an LLC?

Ryan Blake · Answer

@Jimmy Suszynski Most HMLs will want to lend in the name of an entity. This is because 1) it is easier/cheaper/faster to foreclose on a business than it is on an individual and 2) HMLs are not allowed to lend to owner occupied homes. An entity can't owner occupy a home. This protects the lender from slipping into the Dodd Frank banking regulations.

@Kristie Smith You probably didn't have an issue with borrowing in your personal name because you were investing in Texas. The state treats real estate investments similar if they are in an LLC or not. Texas also is a quick foreclosure state. The process is easy so lenders are willing to let the borrower choose how they want to hold the property and loan.

Hope this helps clear some of the confusion. In review, different states have different rules. In Texas, we can foreclose within just 4 weeks. In New Jersey, I can take up to 2 years. This will define how you are able to hold the property and the rates you are receiving.

Kaleb Provence · Answer

@Paul Schaefer

Most Hard money lenders will prefer to lend to entities because they are in the business of non-owner occupied loans. All their loans are business purpose loans. You can borrow hard money as an individual. Each state varies. I know in Texas if you do not own a primary or investment home already they will want you to borrow in an entity to avoid occupancy fraud risk. If you already own a property then you can borrow as an individual.

Kristie S. · Answer

Hey thanks @Ryan Blake

Sounds like I have a lot of homework to do to learn this....

Nate Marshall · Answer

All of my lenders require you to be a business entity. They're not hard money lenders. They have funds or crowdfund. They do require a bit more paperwork but its a far more professional operation.

Ryan Blake · Answer

@Kristie Smith The eviction process and foreclosure process in Texas both benefit the landlord due to speed, not to say they are any less expensive when it comes to legal fees. Our foreclosures provide you with a deed without a redemption period (unless it is a tax foreclosure) but make sure the foreclosing deed you are bidding on is in first position. Only junior liens to the one you buy are wiped clean and tax liens are never wiped cleaned expect for a tax foreclosure. This means there could be a first lien still in place after you buy a subordinate lien. You just have to do a little homework.

Ian Walsh · Answer

It depends on the state and company you are dealing with.

Kristie S. · Answer

@Ryan Blake

Thanks for the clarification! Glad I am in Texas. On the subject of foreclosures, do you think the fact we do it fast down here is beneficial for real estate investors?  I have been thinking of learning how to buy foreclosures as a way to get good deals for rentals/the BRRRR strategy.

Kristie S. · Answer

@Paul Schaefer

@Jimmy Suszynski

I am surprised to see all the replies say HML want to lend to entities.  I just did my first deal with a HML and had no problem finding one that would do it.  Don't have perfect credit either so they wanted to see some other collateral, but overall it was easy.  Now, the interest was 12% though, so make sure the numbers work.  And, make sure they will extend your loan if you don't finish on time.  Not sure if their willingness varies from state to state but I would not automatically discount it until you make some calls.   One more note - the HML I found - there were 2 on my final list are in my state.  Not sure if that matters but have you tried local ones?

Jimmy Suszynski · Answer

To revive this thread, I am interested in this as well. My short term (2-year) goal is to generate $2,000/month of cash-flow. To do so, I want to take advantage of the low rates for refinancing and a bank I am working with currently on a BRRRR is offering very good terms on properties in my personal name. If I form an LLC, the rates on long term rental loans are higher, which will eat into the cash flows.

In a recent episode of Real Estate Rookie, the mother-son duo used hard money as first-time investors without an entity. I've inquired with a dozen HML's who only lend to entities. Internet searches do not help much since Google's algorithms only show what they want.

Odie Ayaga · Answer

@Bethany Patterson you can't typically get a hard money loan on an owner occupied 1-4 unit property. I don't think you'd want to unless you can't qualify for a conventional loan

Can a non LLC qualify for hard money?

Most Popular Reply