Financing My first deal... Need Help.

4 Replies

Hello,

I'm setting up my LLC to buy and hold a property and I'm not too sure how finance this as a business. I don't know what type of loan I should use. Do I use a start up business loan and purchase the property with it, or is it better to get a mortgage through my company?

I hope someone doesn't mind sharing how they finance their first property with their company.

Thank You.

For single family, duplex, triplex, and quad residential property, unless you're buying a free and clear property on land contract (owner financing), you're going to have a hard time getting a loan in the name of your company.  Banks will demand that your name be on the title, and many loans have a 'due on sale or transfer' clause that causes the loan to be due in full if you transfer the loan from your own name to an entity name.  You'll find when reading stories on BP that most often this clause is NOT invoked, but there are plenty of posts from investors whose loans were called due.  

Commercial real estate (larger multifamily properties or office buildings) are different, and in this market it is expected that an entity will hold the loan for the property.

For SFRs, there really is no reason to have the property in an entity, at least until you reach the limit on number of loans in your name, at which time you can refinance with a portfolio lender.  You'll get a better interest rate buying in your own name.  If you're doing it for legal protection, your best protection is proper tenant screening, and proper care of the property once you have tenants.  You can easily add $1m or more in umbrella insurance to the homeowners insurance policy to cover the worst case scenarios, at low cost.

From your question it looks like you haven't spent much time researching this topic yet on BP.  I highly recommend searching and reading, and then asking questions about something that may still be unclear.  There is a wealth of information here on BP, and with a search or two it's not hard to find what you're looking for.