LLC required for receiving hard money?

[Ross Bernard]

I am not very knowledgeable in the areas of LLC's nor hard money loans. I am speaking with a hard money lender for the purpose of funding a flip. He says I will need an LLC in order for them to lend to me. Is this common for hard money lenders/do all hard money lenders require this?

[Stephanie P.]

@Ross Bernard

@Ann Bellamy was very articulate and correct in her explanation, but I'll go a little further. If the loan is considered to have a business purpose, then it is not a covered mortgage mortgage and not subject to the same rules as principle residences. Reg Z, then doesn't apply; but it's extremely important for lenders and brokers of mortgages to have the borrowers state, unequivocally, the intention of the purpose and the use of the proceeds. It must be for business purposes or it will be subject to a host of other regulations. An LLC, is the first step in separating personal from business.

Stephanie