All Forum Posts by: Srini Murthy

 Hi Srini, 

As others have stated, this requirement is specific to each DSCR lender.

There are several that will allow you to close in a layered entity. You will just need to show the warm body guarantor, by providing the operating agreements for each layered entity, along with the EIN, Articles of organization and certificate of good standing. 

Why not ask this question of those same well-known RE attorneys then? Being the ones who set you up with this legal structure, they should be able to help you out I would think... personally I'd be asking them. 

Just curious, how much did they charge you for setting these LLC's up for you? Only answer that if you want obviously, and apologies if that's not appropriate to ask. I just wonder about these overly-complicated legal structures sometimes... it seems like they mostly benefit the companies who are charging people to set these things up.

I set up my own LLC's in 20 minutes on the CO Secretary of State website, it costs $50 then $10/yr. after that. The only reason I have LLC's is for commercial properties when the lender requires them.

You might try showing them the operating agreement and formation documents for the Wyoming Holding LLC. The operating agreement should show your ownership. One of the nice things about WY LLCs that can be tricky in some situations is that Wyoming does not publish the members or managers of LLCs on the SOS website. This allows you to have some anonymity for your structure, but can make working with lenders difficult at times. Legally your structure is just fine, but lenders all have different preferences and internal rules they work with.

If this lender won't work with your structure, your options are to change the structure like they suggest, which I don't usually recommend, or to find another lender who will work with the structure. If it comes down to potentially losing a great deal, you may need to prioritize the deal over the WY LLC benefits.

There are no set "rules". Each program has their own set of rules. The vast majority of programs do not allow for layered LLC's. So, you need to find a program that does allow for a layered LLC. You might have to pay a bit more for it as there is additional risk (the biggest risk is that the originating lender gets stuck with the paper because out the hypothetical programs they offer only 1 of the 5 will allow for layered LLC's. and if they miss one detail that program does not allow that happens to exist in your file they can not sell it, they are stuck with it. lenders like to have at least two takeout plans.)

You might try showing them the operating agreement and formation documents for the Wyoming Holding LLC. The operating agreement should show your ownership. One of the nice things about WY LLCs that can be tricky in some situations is that Wyoming does not publish the members or managers of LLCs on the SOS website. This allows you to have some anonymity for your structure, but can make working with lenders difficult at times. Legally your structure is just fine, but lenders all have different preferences and internal rules they work with.

If this lender won't work with your structure, your options are to change the structure like they suggest, which I don't usually recommend, or to find another lender who will work with the structure. If it comes down to potentially losing a great deal, you may need to prioritize the deal over the WY LLC benefits.

As others have mentioned above, it comes down to the Lender's willingness to take on the layered structure as a part of their portfolio. Your current lender may be willing to make an exception to their program guidelines if ownership is well documented.  If you need a second option or a lender who is willing to work with the structure you currently have, I may be able to help. DM me.

Doug is correct, but generally as long as you can prove ownership of the original wyoming LLC then it should be approved no problem.

 Why do you have it layered in the first place? What is that getting you? 

Seems like wearing two belts to hold up your pants.

Some lenders will allow layered structures, like you are tryig to do, but many won't. It can limit their ability to come after you in the case of a default, which is why you're doing a layered structure, I'm sure. Keep in mind, the lender likely has stringent restrictions from their funding sources that they have to meet and, in most I've seen, layered ownership structures are no allowed. I wish you well and hope you can work this out, but you might just have to buy it in an LLC with only one layer, meaning you directly own it.