How are you holding on to the rental property?

Question

So as the title states, how are you holding on to the rental property? Under your personal name or a business entity name like an LLC?

Are there pros and cons to either way?

The main thing I wanted to know is do I get better lender rates with one or the other?

Iv got a major rehab property and was curious if the interest rates for say a hard money lender would differ based on how I own the building.

Thanks

Mike Hanneman · Answer

If you are just starting out you don't really need an LLC. Fear mongering and guru's have lead many people thinking they need one when they don't. If you have decent amount of assests or are a professional, doctor, lawyer, etc... then it's a good idea.

Either way you should have an umbrella insurance policy to help you in case of a lawsuit.

Anthony Wienke · Answer

@Mike Hanneman

Thank you Mike, that what I was curious about. Just looking at all the possibilities for loans and didn't know the implications of owning the rental property under my own name or as an entity.

I would be nice to get a commercial loan and then refinance after about a year when the rehab work is done. I just don't look forward to that interest rate :P

Mike Hanneman · Answer

If a property is in an entity then some lenders, especially the banks can only lend to you using a commercial loan. Those loans have higher interest rates, maybe that's what they are considering. The HML's that I used require the property to be in an entity.

Anthony Wienke · Answer

@Phil Johnson

The loans im looking at are hard money loans. There not so concerned with how my credit history looks.

Its a rental property with LOTS of rehab work. Hard money loans are about all I can use to get the property up and running.

Anthony Wienke · Answer

thanks, I found a new lender sight thats part of lending tree that asks if I own the property under my own name or as a business entity. Aparently you can get different lenders to offer you loans based on how you answer.

Phil Johnson · Answer

Forming an LLC (or not) has complex legal and tax implications. The book "Loop Holes of Real Estate" has some good information on the subject.

In terms of interest rate, I think your lender will be more concerned with down payment, credit history, etc.

Jonathan Towell · Answer

I doubt the entity type will affect lender rates. We put every property into its own LLC to limit personal liability.

How are you holding on to the rental property?

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