Creating an LLC and moving my condo and mortgage into it
Member since 2023 · 2 posts · 0 votes
Creating an LLC and moving my condo and mortgage into it
Most Popular Reply
Konstantin GinzburgPro Member
Member since 2021 · 376 posts · 242 votesThe route you are trying to go isn't likely to help you with your goal. An LLC is a limited liability company whose primary benefit is creating a separate business entity to shift legal liability too but from a tax and ownership perspective, it still functions similarly to a sole proprietorship where the the actual financial ownership falls on the owner or owners. The only business entity that is able to stand on its own as a completely separate entity is a corporation but those are more difficult to form and require adherence to a lot more rules and regulations. You can shift your mortgage from yourself to the LLC but the condo will show up on your personal credit report. By building an LLC with an established cash flow and its own credit history, you will eventually be able to borrow and finance through the LLC rather than through your personal name but that will usually require 2 years of established tax records and revenues. The primary advantage to this would be since financers who deal with commercial loans, lend to business entities so building up an LLC is a good route if you plan on getting into commercial properties in the future such as a large multifamily properties. As for your immediate concerns: if you have reached your current borrowing limit then you might need to begin viewing other forms of financing such as seller financing, partnerships, or private lending.
5 Replies
- Investor · Charleston, SC · Member since 2011 · 606 posts · 413 votes3y
No transferring your property from one entity to another or in this case from your personal name to an LLC will not change what shows up on credit. The loan will show up on credit since you personally signed for the loan. Even when people buy houses in an LLC the lender usually requires them to sign personally.
However, if you rent the property you will get a "credit" for about 75% of the income generated to help lower your DTI (debt to income) ratio which may help you get another loan.
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes3y
Quote from @Jason Miller:
Hi,
I currently have a condo with a mortgage in my name. I want to move the property and the mortgage into an LLC. I know the interest rates may change (which I'm OK with) but I'm curious if this will still appear on my credit report. I'm going to rent out my current place soon and want to look at buying another condo on my personal credit. But I don't believe I'll get approved unless I can clear this mortgage off of my personal credit. Any advice would be GREATLY appreciated.What you are doing is not going to help you, it is only going to hurt you by costing you more money. Even if you were to get a mortgage in your LLC (not likely), you would still most likely need to personally guarantee it which means its still your debt and you have to list it on mortgage applications.
7e investments53 Reviews - 3yKonstantin GinzburgPro MemberMember since 2021 · 376 posts · 242 votes
The route you are trying to go isn't likely to help you with your goal. An LLC is a limited liability company whose primary benefit is creating a separate business entity to shift legal liability too but from a tax and ownership perspective, it still functions similarly to a sole proprietorship where the the actual financial ownership falls on the owner or owners. The only business entity that is able to stand on its own as a completely separate entity is a corporation but those are more difficult to form and require adherence to a lot more rules and regulations. You can shift your mortgage from yourself to the LLC but the condo will show up on your personal credit report. By building an LLC with an established cash flow and its own credit history, you will eventually be able to borrow and finance through the LLC rather than through your personal name but that will usually require 2 years of established tax records and revenues. The primary advantage to this would be since financers who deal with commercial loans, lend to business entities so building up an LLC is a good route if you plan on getting into commercial properties in the future such as a large multifamily properties. As for your immediate concerns: if you have reached your current borrowing limit then you might need to begin viewing other forms of financing such as seller financing, partnerships, or private lending.
- Real Estate Broker · Hyde Park Tampa, FL · Member since 2019 · 2k+ posts · 3k+ votes3y
The only way that you would be able to have the mortgage removed from your credit bureau report would be to find a lender who will lend in the name of your LLC (not hard) AND not require your personal guarantee (very hard). Talk to a mortgage lender and see if you pre-lease your current condo on a one-year lease if that income/cash flow can be used in your new application.
It kind of is what it is...
- Member since 2023 · 2 posts · 0 votes3yThanks to everyone for their thoughts! I knew about the 75% "credit" of the income generated but it would create a different issue because I would have to move into an apartment so I can put a renter in my condo. I guess I just have to look more into private financing. Thank you to all!
Quote from @Randy Rodenhouse:
No transferring your property from one entity to another or in this case from your personal name to an LLC will not change what shows up on credit. The loan will show up on credit since you personally signed for the loan. Even when people buy houses in an LLC the lender usually requires them to sign personally.
However, if you rent the property you will get a "credit" for about 75% of the income generated to help lower your DTI (debt to income) ratio which may help you get another loan.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.