Re: Refinancing a Property Titled to an LLC - Posted by Ed Garcia
Posted by Ed Garcia on October 05, 2000 at 10:00:43:
I just got through answering a similar question below that was titled, Transferring Funds Among Companies.
Your situation is a common one. I’ve heard this over and over again about how investors are having a problem in having lenders accept their Corporations or LLC as a purchasing entity. I think that it’s funny how we set up LLC or Corp’s to shield ourselves and then expect people to want to do business with them. The Bank or lenders are no fool, they know what were doing, they realize were hiding behind these shields, so what are they expected to say, OK, if something goes wrong with the deal, I know that you’re outta here.
Landis, I’m sure you know that the problem in setting up a NEW Corp. or LLC is just that, it’s NEW. It has no income, no assets, no credit history or track record. It’s like a person who is starting out for the first time with nothing backing them up. However, if someone starts a Corp. or LLC and continues to operate it, developing credit in it, a constant income stream, and assets, it now has established it’s self as a CREDIBLE entity.
My suggestion when starting out, with your first few deals, is to tell your lenders that you want to put your loans in your Corporation or LLC and personally guarantee them. A Bank will have no problem with this. A mortgage co. may, so in that case tell them you want to put the loan in the Corp’s. or LLC’s name with you co-signing for them.
By doing it in this manner, you are now properly setting up your Corp, or LLC to be it’s own entity. After a few years, you then can do future deals with just your Corp. or LLC because it will have it own identity as far as being a qualified borrower. It will have income from the properties that it holds, it will have credit from paying the loans on those properties, it will have assets based on the equity position of those properties and any office equipment that you might have decided to put into or purchase with that entity etc.
After saying this, I’m aware that many of us set up LLC’s or Corp’s for various individual properties. Unfortunately, in doing so, the principles will always have to sign personally or take the loan down in their name.