Need Advice On Financing For 50/50% LLC
my partner and I have formed an LLC with 50% interest each.
we are about to buy our first property, with the purpose
of rehabing, converting to condos and selling it.
I am considering two ways to get financing on the property:
1) get financing for the property as *my* personal investment property
on my name instead of LLC
2) borrow the money as LLC
I am leaning toward 1) for the following reasons:
2.1) LLC is new and has no credit history of it's own, I think it may
be difficult to get loan for LLC and interest rate will likely be high
2.2) If I borrow via LCC, it is my understanding that I and my partner would have
to sign loan personally, which defeats the purpose of using LLC as borrower.
(that's from liablity stand point, however are there other benefits
of doing it this way?)
2.3) when it comes to personal borrowing, it is easier to qualify for loan using
me as a person rather than somehow involve my partner. I have a full time
job and good credit history, my partner is self-employed and has OK credit
history So I will be able to borrow more on my own than together with him
unless I get a loan without documenting income.
I understand that if I decide to borrow personally, I will have a number of
issues to deal with including getting some kind of mortgage consignment or guarantee
from my partner and possibly having to transfer the title to the LLC after the sale
Some other info to consider: the expecting holding period is 4-8 months. We can go
as high as 20% down on the property if necessary.
We will be selling "piece by piece" one condo at a time (this on it's own may require
some kind of creative financing approach).
I'd appreciate any advice!
I'd advise you to put this on the right forum, not this, the legal forum, as this should be reserved for law issues.
[addsig]
Money and Management Forums /
Law and Legal Forum/
The Forum will have topics that cover the Legal questions and business side of Real Estate Investing
seems like the only "right" forum available...
Being in the mortgage business, I can offer you a few observations from my own experience.
[ Edited by commercialking on Date 08/26/2004 ]
You are right about some of the issues with establishing credit to qualify for a mortgage loan as an LLC.
The reason to buy in your own name has a number of advantages, including lower rates and fees and much easier qualifying. I have seen some lenders on a case by case basis allow the deed to be recorded in a Trust or LLC, however, giving the best of both worlds.
The key is credit srength and financial liquidity/depth.
Good luck!
Wwiler, thanks for your reply,
If I buy in my own name, what are the mechanisms for assuring that
my partner has legally equal responsibility for the mortgage payments?