Buy Property or Real Estate with an LLC

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My Real Estate Finance Prof. (CA. JC) recently said an LLC cannot buy property. True?


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Yes, an LLC can purchase or refinance property. This is not an agency (FNMA/FHLMC/FHA/VA) type of loan so the lender/bank would need to hold it in the Portfolio.

Typical requirements are listed below:

  • The LLC must be the borrower and all principals of the entity must either be co-borrowers or sign personal guarantees.

  • Clear Judgment searches are to be obtained on all principals

  • The Operating Agreement (“Agreement”) and Certificate of Formation for an LLC are to be obtained at time of application.

  • Each Agreement must speak to a sole purpose LLC (ie that the sole purpose of the LLC is to hold title to and manage XXXX property).

  • Each Agreement must clearly detail the members and their responsibilities and how their interests may be transferred within the organization.

Answered over 6 years ago

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This is false. Although many lenders do not allow for a Limited Liability Corp to close on a mortgage loan, there are lenders that do.

If you are interested in obtaining a mortgage loan in a LLC, I would suggest that you seek the help of a broker as they will better know what lenders are currently allowing an LLC to take title.

Answered over 6 years ago
Anonymous

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False. An LLC can buy anything it wants, provided that the purchase is made in accordance with the terms of the LLC’s operating agreement. In fact, most developers do business as LLCs. They buy land and/or buildings in the name of their LLCs, build subdivisions or convert rental properties and factories into condos all the time. That being said, there are a few other things to think about.

If you are talking about residential property, i.e a single-family home, a condominium or a 2-4 unit building, it may be difficult to get financing.

For instance Fannie Mae and Freddie Mac, the two government-sponsored entities that buy mortgages from lenders (so that the lenders can replenish their funds and make more mortgages) require that the borrower be a natural person. In other words, if you want a “conventional/conforming” loan, you won’t be able to get it to buy property that you hold through an LLC.

However, there are some lenders who keep their loans “in portfolio” who allow loans to LLCs. They will typically charge higher rates than what you would pay for a conventional/conforming loan. They will also require that the managers of the LLC to sign personally.

Answered over 6 years ago

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