20-30 Year Fixed Rates for LLCs???

[Matt Kehl]

I'm new to Wisconsin RE investing and curious if 20-30 year fixed rates for LLCs are possible. If so, would you be able to message me contact info for these lenders? I've read about signing under your name then transferring to the LLC, but would rather avoid this as some mention there might be legal issues. Thank you!

[Marcus Auerbach]

People are confusing amortization with fixed interest rate period sometimes.

30 year fixed rate loans are goverment backed, i.e Fannie Mae and Freddie Mac. A retail lender will fund the deal, then bundle these mortgages which all have to meet Fannie or Freddie underwriting guidelines, and sell them back to these gov agencies to recoup their funds and do it all over again. These guidelines require the borrower to be a person (not a legal entity) and you can get up to 4 relativley easy, up to 10 with the right lender and a bit tigher qualifiactions. These loans are amoritized over 30 years and the interest rate is fixed over 30 years.

Commercial loans (with the exception of SBA loans, which are kind of a commercial FHA) are not goverment backed/funded and then bank is lending from it's own portfolio. You are able (often required) to hold the property in an LLC and also sign the loan as the entity, however, typically with a personal guarantee. Only very large deals are asset based without a personal gurantee (usually because the income of the owner would not provide attractive collateral anyway, just not enough..)

Most commercial loans are amortized (paid back) over 20 or 25 years, the rate is fixed for the first 5, 7 or sometimes 10 years. The longer the fixed rate period, the higher the rate, because the bank is taking the risk if rates are rising they are locked in. You also want to know if the loan is a balloon note, meaning you have to pay the balance in full after 5,7,10 years. Pratically the bank will just issue a new loan for new terms at that time, but theoretically they can just refuse to and collect, for example if the bank is in a pinch. As long as the borrower has stong financials no big deal, just refinance with another lender. But there are risks, that a residential consumer loan would not have.