Updated over 8 years ago on . Most recent reply
LLCs and Real Estate Investing
Should I create an LLC to buy my first rental properties under? Are LLCs necessary for real estate investing? I plan on growing my properties each year and want to keep them under the same LLC and grow the company while also protecting my personal assets.
Also, how do LLCs get funding for deals? Do banks approach funding a real estate deal for an LLC the same as an individual and run the owner of the LLC's credit to approve the funding?
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I would consult an attorney or accountant in order to figure out the tax/legal advantages with owning property in a LLC vs personal name. However, I can help you with the funding part.
The main reason people buy property in their personal name is to qualify for conventional financing. This financing offers 30 year fixed interest rates, and if you plan to live in the property you will need as little as 3.5% down (15-25% down for investment properties)
Financing a property with a bank is different when the property is in an LLC. Banks will tend to hold on to these loans and each bank has different requirements for qualification. A standard commercial loan will require 20-25% down and will have a 5 year fixed rate on a 20 year amortization. I would recommend calling local banks and credit unions as they will be more lenient than the big banks like Wells Fargo. Qualification for a commercial loan will be a little different, but with smaller commercial deals you will still usually see a personal guarantee from the owners of the LLC and the bank will still be relying on your credit, income, assets, etc.