Multiple mortgages and Credit

2 Replies

So I’m coming close to buying my first property. I currently have excellent credit( greater than 750) and I’m concerned if having multiple mortgages will hurt my personal credit and my ability to continue to borrow. I have not established an llc yet since I don’t own anything as of now. I have also heard mixed review about an llc vs insurance. I’m planning on using the brrrr method so I’m hoping that I’m able to continue to place mortgages on properties that were bought using cash. Any advice would be great.

I recommend you get both insurance and an LLC. Each has its benefits towards asset protection. The LLC also gives tax advantages too versus you doing business solely in your name. The business also allows for business credit which is different than personal credit. I'd recommend you start your in

Multiple mortgages will impact your credit....but not enough of an issue where you can’t continue to borrow. Most banks have caps on how many times they will loan to you conventionally anyways. That’s a strategy but not necessarily built for the marathon in a sense. If your properties are cash flowing and you have good management in place, the banks will more than likely work with you.

Having multiple mortgages will not effect your credit score in any significant manner. I have several highly leveraged properties and still have an 800 score. Getting a loan for an LLC can be challenging because while your personal credit might be good, a brand new LLC has no credit and no assets.

However I highly doubt that you need an LLC right now anyway. The LLC only serves as asset protection in the case of a lawsuit in that they can only sue the LLC for what the LLC owns, and your personal items are untouchable. So if you own 100million worth of properties in your personal name, someone could sue you for 100m and take everything. However if you had 100 homes in 100 LLCs and each home was worth 1m, then a person bringing a lawsuit against your LLC would likely only be able to sue that LLC for 1m, if they tried to sue the LLC for 2m, then the LLC would simply file bankruptcy and dissolve. Either way you stand to risk losing everything inside the LLC, and if you're just starting out and that 1 home inside the LLC is the only item of significant value that you own, then the LLC didn't really protect you from anything.

An umbrella insurance policy on the other hand would stop you from losing the home if you got sued unless you have significant assets.  The policy will simply pay out and cover up to the policy amount, which is typically 1m or 2m starter policies.  If you're getting sued for more than 2m then you did something seriously wrong and are screwed no matter what. =)

In summation an umbrella policy will completely protect you if you don't have significant assets, an LLC will is more useful for high net worth individuals by dividing that wealth into multiple chunks, where only one individual chunk is at risk at any given moment.

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