Can you buy property with an LLC?

Question

Hello!

New investor here looking to buy my first property. I am in the process of setting up a trust. During my conversation with the attorney, she mentioned that it's rare for investors who finance property to buy a property with an LLC since lenders rarely allow that. She said I'd likely have to buy as an individual and take out an umbrella insurance policy for liability protection. Has this been your experience? Do people just quit claim deed the property to the llc afterwards or just hold the property in their name? I'm in Florida if that helps at all.

Billy Daniel · Answer

We've bought almost all of our properties with an LLC.  You won't be able to use traditional mortgages like FHA and VA, but you can use commercial loans all day long.  They normally require a larger down payment based on the property though.

V.G Jason · Answer

An attorney cannot pierce it if you deed it over, and if the lawsuit happens while under LLC title & you've done a full separation of transactional play. If it's happened, it's a weak attorney. $1mil in liability insurance is hit or miss, it's likely they aren't going to even pay for you if something happens.  An attorney has to prove alter ego AND single business entity. For alter ego--keep personal finances out, keep clear p&l, keep personal property and other assets out & separate. For single business entity-- no centralized control, no mutual purpose, no shared finances. Then above all the usual issue is providing fraud.Best advice if you're scaling is to have two LLCs.  One holding & one management. Under each holding LLC you own child LLC that is registered in the appropriate state it owns the house. Under each management LLC you own a child LLC that is registered in the appropriate state it's going to manage the chouse. Once you do that separate bank accounts, file each and every transaction separately, separate agreements that legislate what can be done. Then keep it neat. The management company does all your leg work, your holding LLC just owns the house. I know it sounds like a lot, it's going to be a good few thousand to start but if you're scaling, I recommend you don't start until you can. If it's just one house, LLC it and make sure equity is always low from the get.

Otherwise, you can buy in DSCR or deed it over. Once you have it over, keep everything and I mean everything separate. Even keeping the LLC separate from the one's that own the title to the one's that manage the property. Right now, giving things are hardly ever intrinsic I would opt for a DSCR if you're able to make it intrinsic and use the conventional route to go if it's not and help with rate. It's rarely worth betting on re-fi, it's going to cost you likely more than you'll save for 3-5 years and is useless. Better option is to recast.

Seller finance is the best option but you go to make sure there's no note on the property. Almost any worthwhile MLS listing will not entertain a seller-financed deal simply because of you being the underlying risk. There's still a naivete and concern of it due to it not being done in so long. Seller and seller's agents probably never even heard of it and if they have they are going to think you can't get banked approved. Most will take lender approved bidder at 85% house ask than seller-financed at 100% house ask.  Any area that's going under 15% ask is likely not the area that's really going to be worthwhile investing in unless you want to be a slumlord. Then it that case, absolutely LLC up and even get an asset protection trust above all. Too much tail risk in shit neighborhoods to play in, and not enough reward at the end of it to really roll the dice on in my opinion.

Ash Hegde · Answer

You are unable to use conventional financing when you purchase with an LLC, which is likely what she was thinking of. There are alternatives like DSCR loans, seller finance, subject to, that allow you to acquire property with an LLC. I do agree that if you qualify for conventional financing, it is better to start with that (and additional insurance) as the rates and fees will be better.

John Morgan · Answer

@Alejandro DIaz

Buy in your personal name and keep them in your personal name until you tap out with 10 conventionals. Just get a million in liability for each property and you’ll be fine. Any attorney can pierce your LLC if you deed it over to an LLC after you buy with your personal name. After 10 conventional loans, buy with your LLC with commercial or DSCR loans.

Mark Munson · Answer

Like others have said, just use a hard money/DSCR lender, as those lenders lend directly to LLCs. With traditional banks, you will eventually get capped at a certain number of loans or a dollar amount, whichever comes first. This is called "One Borrower Exposure", the banks don't want to be over exposed to one person, thus the rule. You won't run into this the same way with some DSCR lenders.

V.G Jason · Answer

Then just do a DSCR loan, 25% down min.

Joe Villeneuve · Answer

Your lawyer is right,...but with an asterisk.  If you do seller financed deals, you can buy with an LLC all the time.  I do.  It's my favorite way to buy.  As far as I'm concerned, it's the only way to buy.

Can you buy property with an LLC?

Most Popular Reply