Small Banks, Refinancing, LLC

  1. small local banks are supposed to be one of the better sources of financing for investors, but I read on here that a lot of them won’t finance an LLC property. Will the smaller banks accept you as a guarantor for the LLC, or is the only route to buy the property in your personal name and then transfer to LLC, hoping that doesn’t trigger the DOSC?

  2. If you buy the property in your name and then quitclaim or warranty deed it to your LLC after the fact, could that be used against as “piercing the corporate veil” in a lawsuit later on?

  3. If you buy in your name and then transfer to your LLC to get financing, won’t you just encounter the same problem again down the road if you try to refinance, since the property will be in your LLC’s name at that point?


It does trigger the DOSC. You just hope they don’t find out and call the loan, which is actually pretty slim.

Yes. If the transfer is deemed fraudulent, then the property will revert to the grantor and any liability will transfer with it. This is pretty easy to do if you use some kit that boasts about asset protection and protecting money from creditors as the kit will be used as evidence of your intent.

Yes. You can hide the transaction better by holding property in trust and then changing the beneficial interest as needed. Title doesn’t change and the beneficiary change is a private transaction.

Thanks BLL. It’s sounding more like LLC + Land Trust is the way to go, although I was hoping I could get away with just LLC.
Another issue: people have mentioned applying for credit cards in the LLC’s name in order for it to build a credit history and become more appealing to banks for loans. But don’t they take into account the actual income the LLC earns from rentals, not just the credit score? If you have only a couple of low end rentals in your LLC it might not earn much income. Do you have to keep acting as a guarantor for the LLC forever or is the idea that it will be able to stand on its own in terms of qualifying for a loan at some point?

Apply for credit in the name of the LLC and use yourself as a guarantor. The LLC can use your personal resources and credit to qualify. At some point, you may be able to get loans without a personal guarantee. However, any smart lender will require a personal guarentee.

BLL nailed it - as always. This is one of the issues with incorporating. You may find some small banks are unwilling to work w/ an LLC. No problem, just keep checking around with other banks. Our banks have been just as interested in our personal finances as well as the business income/expenses. Most of the time they understand you’re not going to be making a huge profit up front if you have to turn around a distressed property. Paying too much and not getting enough rent to cover your normal monthly expenses is a completely different animal. We don’t screw around with changing title after the fact. We always get title and the loan in the LLC name and guarantee it ourselves. If you’re making smart business decisions and bieng responsible with your personal money and the business money, you should find someone willing to work with you. Our business doesn’t have a credit card. If the business needs money, we loan it money using a promissory note with reasonable interest and payment plan. I don’t care if the LLC gets a credit score per se because I’m going to show a bank all our financial documentation when we apply for a loan anyway. The bank is going to look at our personal credit anyway.

Thanks everyone. The more I read, the more it seems like with every asset protection option there is some kind of Catch 22. But that’s just how it is.