Business vs Personal Loan

7 Replies

I'm a beginner - haven't even bought my first rental property yet. My ultimate goal is to buy or build my own neighborhood of rental properties. When I start out, should I get a personal loan or start an LLC?

I think you probably want to start an LLC. I don't think the lending process is that different and you have protection if something goes wrong in your rental.

Updated about 2 months ago

My information might have been bad, ignore this!

Hey Rachel,

Unless you're extremely worried about protection and are going to operate the property poorly (not fix anything or without professional management), I really wouldn't mess with an LLC.

I didn't get an LLC until I had over 10 properties.

Use your personal financing (which is cheaper than commercial) then when you do want more protection, deed the properties over to LLCs. 

Hope that helps!

Originally posted by @David Yee :

I think you probably want to start an LLC. I don't think the lending process is that different and you have protection if something goes wrong in your rental.

This is incorrect. The lending process, terms, and down payment are all VERY different for LLCs than it is for personal loans. A 30 year fixed rate conventional loan in your personal name is almost always going to be your best bet for financing rental properties.

When starting out, assuming you're buying basic single family homes (anything under 4-units), I would buy and finance in your personal name and not as an LLC. If you're worried about liability then obtain an umbrella liability policy that will cover all of your assets.

Originally posted by @Joe Norman :
Originally posted by @David Yee:

I think you probably want to start an LLC. I don't think the lending process is that different and you have protection if something goes wrong in your rental.

This is incorrect. The lending process, terms, and down payment are all VERY different for LLCs than it is for personal loans. A 30 year fixed rate conventional loan in your personal name is almost always going to be your best bet for financing rental properties.

When starting out, assuming you're buying basic single family homes (anything under 4-units), I would buy and finance in your personal name and not as an LLC. If you're worried about liability then obtain an umbrella liability policy that will cover all of your assets.

 Uh oh, i think i might have bad a miscommunication with my realtor then! You might have just saved me from a big headache in a few months!  Thank you for clearing this up and don’t listen to my last post.  I will edit it out.