I have been pounding the pavement over the last few weeks looking for small local banks that will do portfolio loans for my real estate investments. I have found a few that will do all the loan paperwork (title, security deeed, title insurance, etc…) in the name of my LLC. In each case, they require that all members of the LLC personally guarantee the loan.
Even though the property and deeds will all be in the name of the LLC, will I have any exposure individually if I have guaranteed the note??
The “co-signing” of the loan, personally guaranteeing it, as long as the LLC holds title and does all repairs, completes all ongoing debt service, etc - the asset falls under LLC protection from lawsuits and the like.
If this is correct, I’m gonna buy like 20 houses in the next 6 months. Holy crap. JACKPOT!!!
correct. where 'ya been Dave? taking time off after the season?
It’s also important to note here a significant difference between LLCs and corporations.
Owning stock in a corporation is considered an investment, whether it’s IBM or TMCG, Inc. As an investment, it is available to satisfy a judgement in the event that you are PERSONALLY sued and lose. This would give your adversary control of the corporation’s assets and you lose the corporation (and your investment property).
Membership in an LLC, though, is considered personal property. As such it is not available to satisfy judgements. This gives the LLc superior protection from your personal liabilities.
Both the LLC and corporation protect you personally from liabilities arising within the company. Only the LLC protects the company from your personal liabilities.