Building credit for LLC

[Cody Smith]

Hello BP, this is a two-part sort of complex question so I will try to keep it short.

I will be leaving my W-2 job in about 24 months (Army) and making my current part time business (RE sales) my full time job. This will put me on a commission based income and change how I appear to lenders I assume. I have one rental property currently.

I am thinking about opening an LLC so I can begin building the 2 years of credit history required by most (so I've heard). I wanted to transfer my existing rental into the LLC, but I have a Ginnie Mae loan and apparently this is only possible by refinancing the loan, which I don't really want to do.

So, my 2 questions are:

1) Is the LLC credit history as important as I am assuming? Will it actually help me in the long run like I think it will?

2) Is a refinance the only option I really have to transfer this Ginnie Mae loan into the LLC?

Thank y’all so much!

[Steven Goldman]

So if you use debt service coverage financing your LLC has nothing to do with it. It is based solely on credit score and debt service coverage. D.S.C.R. is calculated as follows: RENT/P.I.T.I .= D.S.C.R.                                                                                                        Some lenders reduce the rent by management fees and or 5 percent for repairs and vacancies. So unless you are trying to borrow money for the LLC as a business loan you need not worry about its credit rating. You will also need six months mortgage payments in reserves in some type of account. It is not escrowed but it is a requirement. You should form a partnership with a mortgage broker and run your ideas and deals past the broker before you commit to them. Good luck.