forming a LLC?

Question

im new to the real estate game
my question is, if an investor forms a LLC how do they go about building credit rating for the LLC or is the credit of the owner or owners is taking into consideration?

thanks

Linda Weygant · Answer

My mortgage is in the name of the LLC, using the LLCs EIN, but I personally guarantee the mortgage.  Therefore, the LLC will soon have a credit score as the mortgage gets paid which will also reflect on my own credit too.

Home Depot will also give me a credit card in the LLCs name - again, personally guaranteed by me, so that will be another source of credit.

I have been told that after three years, I could petition to get my name off of the Home Depot card and have the LLCs credit score be the sole basis for credit (or close down the old card and reopen under the LLC only).  I can also refinance the mortgage in the same way.  With three years of tax returns as well, this seems like a slam dunk, but who knows what three years will bring.

Ryan Webber · Answer

Banks will normally heavily factor in your own personal credit history, and also make you be a personal guarantor for any loan.  They will also look at your company's financials to determine its credit worthiness and financial outlook.

Linda Weygant · Answer

I think it depends on the bank and what they offer.

My bank considers my mortgages to be a commercial product, just by the fact that they are in the entity's name.  There were several residential loan products that were simply unavailable to me because the title is in the entity's name.  I have no idea if that's my bank's rule or a general lending rule.

Michael Y. · Answer

@Linda Weygant First off, very helpful. I know the thread is fairly old, but quick question.

The loan that you got in the LLC that you personally guaranteed, is that a commercial loan or residential? Curious if you can get a residential loan in an LLC if you personally guarantee it.

Maurice Graham · Answer

I am positive that a CPA or real estate attorney on the site or in your area will be a great source. Good luck buddy!

Derek Coleman · Answer

i guess banks would look at my financials  since the LLC would be a start up

Wes Tuinstra · Answer

They would look at your financials when you're just 
starting out.

But after awhile, when your LLC owns numerous
properties and has income and profits, they will start
looking to the LLC's statements to make decisions.

Derek Coleman · Answer

anyone

forming a LLC?

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