How to purchase/fund an investment property under an LLC

Question

As the title says, I’m just curious how to go about purchasing deals and securing funding under an LLC as to not have investment properties in my personal name. Any and all information is appreciated!

Tom S. · Answer

@Matthew Morrow What are the potential tax benefits for holding a rental property in an LLC, that you wouldn't otherwise get?

Matthew Morrow · Answer

Chris,

Smart move considering an LLC for your investments; it offers both asset protection and potential tax benefits. Here's the skinny:

• Set Up the LLC: You can do this through online platforms or hire an attorney. Ensure it's correctly formed in the state where the property is located.
• Open a Bank Account: Once you have your LLC, open a bank account in its name. This keeps personal and business transactions separate.
• Securing Funding: Many lenders are open to lending to LLCs, though terms might be different compared to personal loans. Ensure your LLC has a strong financial position. Some investors start with a personal loan and then transfer the property into an LLC, but be wary of "due on sale" clauses.
• Purchase Property: Always use the LLC's name on all contracts, offers, and documents. This ensures the asset is under the LLC from the outset.

Networking with seasoned investors and joining local investment groups can provide you with deeper insights and best practices.

Good Luck!

Matt

Tom S. · Answer

@Chris Thomas Even closing under an LLC, lenders will still require a personal guarantee, so keep that in mind. For tax purposes, the LLC is disregarded and the numbers will be reported on Sch E of your tax return. So when applying for new loans where the lender requires tax returns, it will still show there.

Eliott Elias · Answer

DSCR lending will allow you to close in an LLC.

Chris Seveney · Answer

@Chris Thomas

My recommendation is to do some research by clicking on the hourglass in the upper right and search as this question is asked approx 3-5x per day.

How to purchase/fund an investment property under an LLC

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