FNMA Regulations Won't Accept LLC Properties

[Daniel Smilansky]

Hi all,

I am in the process of seeking out financing for my first out of state buy and hold deal. The properties I am targeting are in the 25k - 60k range located in Milwaukee. One of the lenders I contacted stated that FNMA Regulations won't accept any property who title is listed under an LLC. Given that this must be a strict rule, is there any way for me to set up an LLC for a property after obtaining financing?

I have heard that a Property Management LLC can be set up to shield yourself, but I am going to be hiring a property manager and don't know if that would help me. In addition to this, it appears that obtaining an umbrella insurance policy will give me another layer of protection. 

If there is no way for me to set up an LLC for a financed property, and I have the resources to buy a property with cash (vs. 2 or 3 financed ones), would it be preferable to opt for the cash route in order to set up an LLC even though I would be losing some short term leverage? 

[Jon Holdman]

Portfolio lenders will finance properties owned by LLCs.  This will be more like commercial type financing with short terms than conventional.  And you may have to make dozens of calls to find one.  But they do exist.  Try smaller banks and credit unions.

If you want conventional (30 year fixed rate) you'll have to put them in your name. You can transfer them to an LLC after getting the loan, but that violates the due on sale clause. If the lender does call them loan, you should (no guarantees) be able to put them back into your name and avoid the call.