LLC and S-Corp or no.....?

6 Replies

Hi Everyone,

This is my first post and I'm very happy to have found this community!  I'm a wannabe investor... just gathering info at this point but I'm determined to make this happen.

Anyway, my question is, I read somewhere that if you have an LLC or S-Corp set up for tax purposes then you don't qualify for a certain loans such as FHA... is this correct?

I had planned on setting up an LLC and then being taxed as an S-Corp but I'm wondering if that will make financing more difficult for me especially just starting out.  Any thoughts are very much appreciated!


Sorry, and I should add that the initial reason for me setting up the LLC was for my other means of income which I get a 1099 for each year... not REI. But, now I'm wondering if that will be a problem for my REI investing going forward. Thank you.

Jim, an LLC isn't usually set up for tax purposes, it is usually set up to protect your personal assets from liability.

However, to answer your question: An FHA loan is for owner occupied only, to the best of my knowledge, although I don't work in residential lending, so someone can jump in and correct me.

Secondly, conventional residential loans cannot usually be made to LLCs - guidelines permit lending to people only. Therefore holding properties in an LLC requires that you obtain a commercial mortgage. Commercial financing is an entirely different animal: higher costs of closing and appraisal, 5 year terms with new rates set each 5 years, 25 year amortization only, and different criteria for qualifying: mostly property based instead of borrower based. In addition, downpayments are mostly 25% to 30% minimum.

LLC's are by far the most popular entity for investors.

Countdown for Joe's arrival

Thanks very much for the replies everyone!

@Ann Bellamy, your post just lets me know that I don't even know what I don't know yet :)

My LLC was for protection and I would be taxed as an S-Corp BUT that was all for another couple of sources of income that I have. I just wasn't sure if it would apply to any RE investing that I do moving forward. I think I definitely need to start with residential property and since I won't be living in those properties then FHA type loans are out of the question.

....... so much to learn!.....  

Thanks again folks.


There are some tax differences between LLCs, Partnerships, and S-Corporations. With S-Corporations, shareholders don't get debt basis for any debts that the corporation takes on, other than personal debt that the corporation owes directly to the shareholder:

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here