LLC and Refinancing

Once an LLC owns a property through seller financing - can it refinance this property through a bank - pay off original note held by seller at refi closing - and secure this debt with this property?


I’ve heard that some lenders will do this. If the LLC is on title they will probably require a “person” (you) to guarantee the loan. Check with a mortgage broker to see if they work with lenders that allow that.

yes. if you can’t find a lender who will do this, I may have some contacts for you.

Thank you for your replies.

I WILL figure this out. It makes absolutely no sense for me to operate an LLC any members, having to personally guarantee any loan. I understand a lenders problem given the liability “protection” of such a company, but it just doesn’t make good business sense to guarantee anything personally, if you’re operating a business.

So, mcwagner, I will pursue this option, but I won’t be surprised if down the road, I will not be contacting you. Thanks again.

I would disagree that it “makes no sense”.

An LLC protects your personal assets. If you own property in your own name, all of your personal assets are at risk to a liability that arises in that property.

Little Suzie slips on that board you negligently didn’t repair in time, breaks her neck, and your liability umbrella isn’t going to cover the judgement that Mama is going to get.

Mc, somewhere in there, I lost you on the liability and mama. Sorry, it’s late and I’m slow on the uptake.

Yes, one aspect of having an LLC is not being personally responsible for LLC debts. Of course, this will not apply if you have to personally guarantee a loan.

However, this does not mean that there is ‘no reason’ to have an LLC. There are other VERY important reasons for operating within an LLC. And one of the most important is asset protection.

In light of this, re-read the previous post.

I think what he is trying to say is that financially you are responsible for the property. However, the issues of liability fall on the LLC.

LLC and Corporate liability when associated with a mortgage note is the same as it would be on a commercial property. If you silp and fall at Microsoft Headquaters the Company will be liable and not the officers of the company. The incorporated intity will be solvent through the means of hefty insurance protection clauses. You can fair just as easy on a residential property if you know how to insulate yourself properly.

Right. You don’t want one “bad” event to allow an adversary access to your personal assets OR any other properties that you own. If you own all this in your name, then they can gain control of any assets that you own if they sue you and win.

If the LLC owns a property, then your personal assets are protected. Further, if each (or few) properties are siloed within seperate LLCs, then properties in other LLCs are shielded from events that occur at a particular property. Meaning, you might “lose” one property (or few), but not all of them.

Liability insurance is very important, but it can’t provide the same type of protection as operating within an entity.