How do Banks feel about LLC's

Question

I have 4 SFH's, 3 are paid for. I purchased 3 within the last year and would really like to buy more. If I choose to do so I will need some help from a lender. I haven't put any of my houses in an LLC yet. I do have a $1M umbrella policy. The reason I haven't put any houses in the LLC yet is that I've heard that banks really frown on lending to LLC's so I'm guess I'm wondering what I should do. I've also heard that I must own the properties for a year before they will loan against it? Should I put the properties in the LLC or wait till after I get a loan? Any help would be greatly appreciated.

Jason Wheeler · Answer

Most lenders won't lend to LLCs however they will lend to the owner.  I always tel my clients to fund the loan in their own name and transfer it to the LLC or SCorp once it funds.  Depending on your state and bank rules can change.  You should talk to a consultant that specializes in loans in your area.  What state are you in?

Bill Gulley · Answer

David, why don't you go to your bank and tell them what you want to do and why? See what they say, if they don't like the idea, find another bank or lender to work with.

How banks feel is a tough question, depends on many factors. Some of thier best customers are probably LLCs.

There is a difference in a small or regional bank and a bank that is governed from 1,000 miles away. It may matter too who they are selling loans to or if they portfolio the loans.

What you're looking at here is changing how a loan is slotted, whether it is a commercial loan or a residential loan. It matters to the bank since they have rules they must live with.

If you're refinancing, go talk to them and see what they will do, no one here can say it will or won't work for you. But, expect to be personally responsible on the loan, it generally takes a strong company wit it's own ability to pay, good management track record and credit to get a loan without the principals signing personally on the note. Good luck