So, as the title says, I have set up my LLC, I've built my team like David Green suggests, and I've found a market and have analyzed 30-40 properties. I've found one or two I want to buy. As a sole proprietor LLC, how do I go about getting a mortgage? I got a pre-approval quote as an individual (no issues, 2nd mortgage and its a traditional 20% down). From what I have read here and elsewhere online, I am the financial backer and my credit profile is the one backing the business and purchase. How do I complete a deal in the business' name? Any advice or suggestions on this would be much appreciated.
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
7y
Luke:
If you want to get a conventional mortgage, you will have to do it in your own name, not the LLC. A bank will often create a mortgage in the name of the LLC but it will carry higher interest and typically have a balloon.
Another strategy is to buy in your name and then quit claim it into an LLC. Technically that risks triggering the due on sale clause, but I've not heard that actually being a big risk.
Alternatively, and what I have done, is buy the property in my name, get great insurance, hire a good property manager who runs the property fairly and legally, and then get an umbrella insurance policy for additional liability coverage.
Attorney · Austin, TX · Member since 2014 · 1k+ posts · 932 votes
7y
A strategy that is often used to keep the financing you have access to with your own name while utilizing the liability protection of the LLC is through the use of a land trust. You can get the personal loan in your own name, transfer the property into the Land Trust (this type of transfer does not trigger the Due on Sale Clause,) and then assign the LLC as the beneficiary - granting you the liability protection you want for the property. You will want to involved an attorney who is experienced with these types of structures, as they can even introduce anonymity into the process by signing the public documents as a "nominee trustee," as described in this article. It can be a painless process on your end when you have the right team members on board.
This isn't legal advice, just my opinion as a real estate investor.