How to purchase under LLC instead of personal name.

Question

Hi everyone,

We are new investors looking to invest in the KC market. How do you go about purchasing properties under your businesses? We are creating a new LLC but the purchase will be under our own credit profile. I understand we can quitclaim the deed to the business however don't we still require to be on the deed as well because we are holding the mortgage with a lien against the property? I truly have no concept of how this works, and I'd appreciate any insight. I've spoken to an attorney and am still about as clear as mud.

Cheers!

David M. · Answer

@Tiffany Perdomo

Well, you know that there is the concept that you don't really need a LLC for residential properties?  They are kinda oversold, but consult with a qualified professional and whatever works for you...  LLC's provide not tax/accounting benefit unless you are investing with non-spousal partners...

If you want to purchase with a LLC, you need to obtain non-residential / commercial financing.  Legal entities, such as LLC's, are not eligible for confirming loans (e.g. conventional, FHA, etc).  Yes, you can quit claim the deed, just remember that you need to protect your corporate veil.  While co-mingling funds is a quick way to pierce your veil, using the LLC as an alter ego is also a way.  So, just moving the Title to your LLC and leaving the mortgage in your name, without generating any other paper, isn't going to help.  Its not exactly a clear cut answer as to when the veil is pierced as its a legal matter of "facts and circumstances."  So, be careful.

David M. · Answer

@Tiffany Perdomo

Oh.  hmm...  Not sure with effective 6 units it makes it a commercial property if you get that unused bldg going.  Interesting, I wonder how your zoning works out..  Well, the LLC might be the better way to go.  Make sure you handle your funds correctly and maintain that corporate veil.  Good luck.

P.S.  I did also send you a direct message.

Tiffany Perdomo · Answer

Thank you @David M. The property we are looking at is currently used as a 4-plex but has a second unused building that houses 2 additional units. I believe it could also qualify as a DSCR loan so I will check on that, at which point the LLC would be eligible to purchase it, with my limited understanding.

I appreciate you taking the time to explain.