So yesterday I closed on my first investment property. I am buying in my LLC name. I was surprised when I reviewed the paperwork that I am appearing as a co-borrower in the promisory note and in the deed of trust. I understand I am personally guaranteeing the mortgage, but I did not expect my name to appear on those documents. I talked with the lender and they explained that the Warranty Deed will be in my LLC’s name only. But that the Deed of Trust and promissory had to include my name me as a co-borrower because I am guaranteeing the mortgage. Have you had similar experience?
My personal name in the Deed of Trust and promissory note.
Is this a conventional loan? Who do you have the loan with?
I think this may count as a personal property not just a business property because you are on the note which means you are obligated on the note. Fannie Mae and Freddie now limit the total number of properties you own to 4. I think it may depend on whether they report it on your credit report.
If it is only in the business name it will not count against the 4 property limit. Something to think about.
It is not a conventional loan. It is a HML/private lender. They told me that they will not report the mortgage on my credit report unless it goes on default. I am personally guaranteeing the note though and this was the reason they gave me for why my name is in the deed of trust and in the promissory note. It seems that my name will not appear in the Warranty Deed. The Warranty Deed will have only my LLC’s name.
This is what they explained to me. I am seeking some insight from others that have bought properties on their businesses’ names.
Ours was in our business name w/ personal guarantee at my hometown bank. I swear they must not report anything to credit bureaus unless it goes into default. I’ve had no less than 10 or so car loans with them and not one has ever shown up on my credit report. They didn’t tell us anything about having our personal name on anything besides the loan papers. Everything else is in the business name.
Your name is on the note because you are guaranteeing it. A verbal agreement isn’t going to hold up in court. You must sign a document that says you will pay if the LLC doesn’t. I’m not in a deed of trust state and can’t speak to that question.
As they told you it will not show on your credit report unless you default. When you go to refinance the property the lender will need a copy of that personal guarantee to show that you are obligated on the note.
The lender was just protecting themselves in case of default.
Thank you for the information/insight.
I do understand that my name needs to be in the promissory note, along with my Company’s name. I am personally guaranteeing the note.
I also understand that the Warranty Deed will be issued in my company’s name only. The Warranty Deed is the document that transfers ownership.
So I am fine with:
Warranty Deed - my company’s name.
promissory note - both my company and my name.
My question is in regards to the Deed of Trust. The lender included both my name and my company’s name in the Deed of Trust. Title is telling me that they can’t record the Deed of Trust that way because the contract to purchase was on my Company’s name only.
So right now the lender and title are not agreeing on the correct way of doing this. Title wants the Deed of Trust in my company’s name only. Lender wants to include my personal name in the Deed of Trust. I am caught in the middle trying to resolve this issue.
So this is why I am asking other investors here if they have experienced something similar to this… when they buy properties in the company’s name with personal guarantee, is the Deed of Trust issued in both names or only in the company’s name?
Justin - Do you remember if your Deed of Trust had your Company’s name and your name on it?
thank you for all the help.
I will try to contact my bank and ask them to be sure about the Deed of Trust. I want to make sure I give you the right information.
you’re not on the deed. you don’t own it. stop.
you can’t give a deed of trust on something you don’t own. stop.
both have to match.
thank you all for the advice/insight into this.
Yesterday my lender talked with title and sorted things out. The deeds were recorded yesterday and I got the keys… :O)
Here is how we landed:
Warranty Deed - only my Company’s name - transfers property from bank to my Company.
Deed of Trust - both my company and my name - put property in a trust - lender is the beneficiary.
promisory note - both my company and my name - this is the note that my company and I are obligated to pay for.
Not ideal because I would rather not have my name in the Deed of Trust, but good enough. The mortgage will not be reported on my personal credit report unless my company defaults.
Have a great weekend!
Congrats! Sounds like you got everything worked out reasonably well. I quit trying to contact my bank after Mark gave his response.
Have fun w/ the rehab.
Take lots of pictures!