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hi this is the business guy how do you get a real estate loan in an llc i've been investing in real estate since the age of 23 and here are the eight steps to getting a loan in a limited liability company okay number one first thing obviously is you set up your llc you can give us a call and our attorneys and consultants can help you do that right number two you get an employer identification number from the irs as you may know you do that by filling out an ss4 form or if you want we can help you with that too number three you complete your corporate record book and this includes the operating agreement the minutes to meetings any of your membership certificates representing your ownership and this is a company record book that looks something like this number four after this you open up a bank account in the name of the llc now you do this because the law considers the llc a separate person from you so it needs to have its own account open it up throw a few bucks into it and number five you identify the property you want to buy and you make an offer with at least a 60-day closing and i'll tell you why number six since you have your account open the next thing you do is you put in enough money into your llc bank account to cover your down payment number seven you apply for your loan hopefully you've already contacted that lender in the beginning so you know all their requirements number eight finally you let that down payment season for at least two months which is why you give yourself a 60 day closing period if you don't you're going to have a hard time getting your loan later i'm going to show you an actual closing statement on a two and a half million dollar real estate purchase that i made how much money i put down i'm going to be totally transparent with you on all the figures i'm the business guy and we're talking about how to finance a property inside of an llc and if you're watching this video on youtube please take your mouse or your thumb and click the like button below so that youtube promotes this video thank you very much and you can also click the subscribe button so that when more videos come out like this you'll get notified okay so why must you do these things for example why does the down payment need to sit in the llc bank account for two months before they finance you you see underwriters follow very strict guidelines the global financial crisis of to 2008 was mainly caused by easy lenient lending practices lending to people who could not afford to repay the loans lending to people based on what they said they made rather than what they could prove they made i remember when i bought my first family home back in 1988 my wife and i bought a two-year-old home for 62 500 yeah if you can believe that it seemed like we had to show every scrap of paper we owned and pledge our first born child to get that loan i mean it was like torture by the way our interest rate was nine and a half percent then in 2005 when we bought a 1.7 million dollar home in california they said we could just get a loan by saying how much we made a year i mean we didn't even have to prove anything my job just about hit the floor so in response to the financial collapse from the lucy goosey lending standards the government enacted the dodd-frank wall street reform and consumer protection act on july 21st 2010. as a result underwriters are forced into tight little boxes of things they must see before you can get a loan again you can contact us to get your land trust and llc set up but don't call us about loans we're not freeinformation.com call a lender for that information now i bought a two and a half million dollar office building in california let's go ahead and take a look first of all i bought the property in a land trust a land trust for privacy of ownership and llc owned that was the beneficiary of the land trust and this is exactly as we teach on our videos okay now here's the actual closing statement on a property that i bought for about two and a half million you can see the price right here 2.449 somewhat change million you can see down here i put 75 000 down as earnest money then a month later after i approved the contingencies i added another 50 000 right here in earnest money so that showed yes i'm really committed to going through with this purchase i paid 225 000 from one company that i owned and then another 175 000 and some change from another company that i own for a total down payment at two hundred 525 seventeen dollars and twenty two cents they say wow where did you get that kind of money from and the answer is from other properties that i sold that went up in value and that's where the money came from in fact i just sold a property that i bought for four hundred thousand and sold for a million hey the first property investment i ever made was a mobile home wasn't even technically real estate i bought it for 1500 and then i sold it for 3500 about six months later so i started small and then you build up little by little and that's where i came up with this down payment you can see the quarterly association fees the lender fees and so on and you can see a bank loan from bank of america for 1.959 million and then you can see the other miscellaneous expenses to do the close and then in the end i had to come up with another five thousand one hundred and fifty three thousand dollars in order to close the loan so that was a property but a land trust took title to the property and an llc was the beneficiary of that land trust now in addition to the 2010 protections the consumer financial protection bureau also enacted new laws at the end of 2020 saying that qualified mortgages cannot include dangerous practices such as interest only so you never pay off the mortgage or balloon payments where you have to pay the entire balance at once hey that practice was great for mortgage-backed security investors who wanted their money back at a certain period of time but terrible as a loan consumer who has to pay let's say four hundred and seventy thousand dollars all at once in three years out there scrambling to refinance a loan now another thing to know about getting a loan in an llc is that you will be personally liable for the loan that is if you don't pay the loan it will affect your personal credit and that's why they do it if the bank feels the pain they want to make sure that you feel the pain personally and come after you personally in most states for any money they lose if they seize the property and sell it now there are some exceptions out there such as non-recourse loans that people can get for purchases in their self-directed iras but they are expected to pay higher interest rates and huge down payments okay now which documents do lenders need to finance a mortgage when an llc takes title in order to get a mortgage under an llc for rental property you'll need to demonstrate to the lender that you're running your llc like a real business so documents and information a lender will need when you apply for a loan under an llc includes your articles of organization the operating agreement including the information on all of the llc mem
Thanks for your comment Tyrell Erhart, have a nice day.
- Melany Tapanes, Staff Member
what is a construction loan well there's really two types of construction loans there's renovation loans and there's new home construction loans a renovation loan is when you buy a house you know you're going to have to do some renovations to it so the bank fronts you some extra money and pays the contractor to actually do those renovations the second time is a loan where you're going to actually build a new house on a blank slate a blank piece of land and the bank is going to lend you all the construction costs to actually pay for usually the land and also the contractor to build the house on it
Thanks MoosfarnJ your participation is very much appreciated
- Melany Tapanes
About the author
I've studied icelandic history at Newberry College in Newberry and I am an expert in multi-valued logic. I usually feel alone. My previous job was marine architect I held this position for 12 years, I love talking about bonsai and metaverse. Huge fan of Jeremy Renner I practice marathon swimming and collect steiff teddy bears.
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