East Lansing, MI · Member since 2020 · 13 posts · 5 votes
Hi BP community,
I was hoping for guidance on financing a single-family property through an LLC. I am curious about how this can be accomplished and the terms of the loan (I understand I don't need an LLC but I know many investors do this). I want to know how easy it is to finance through a traditional lender or if finding an alternative financing method is a better way to go.
Rental Property Investor · Aiken, SC · Member since 2019 · 129 posts · 44 votes
6y
I have sfh's with a local credit union under my LLC's. The terms are 15 to 20 yrs and higher interests. That may not be the case for everyone but that's how it is for me. My rate with this credit union is 2.69% for my primary home and 4.97 for my REI's.
Yeah, you are going to have to talk to a qualified accountant/cpa and perhaps and attorney about that one. I think if you are doing passive investments, i.e. rentals, you aren't by definition doing an active business. So, you can't take active business deductions on SchC. Rentals are on SchE which don't allow what you are looking for. Furthermore, you don't have to worry about avoiding SE taxes since your rental income is passive.
So, you already have the benefits of passive income. Don't try to make them active so that you have "come up" with deductions to avoid the taxes that you didn't have to pay in the first place...
Does that help? Am I talking about the same thing you are asking?
Lender · Palo Alto, CA · Member since 2017 · 142 posts · 91 votes
6y
@Josh Jackson - You're always able to give it a shot, but look at it from risk assessment point of view. The more experienced and proven your business model is, detailed business plan, and a certified financial history to back it all up, the less risky you are to lend to and easier to finance you at a lower rate.... As a private lender, those are definitely things I consider! I ONLY lend to Entities and not to people personally.
East Lansing, MI · Member since 2020 · 13 posts · 5 votes
6y
@David M. yes that answered my question. What you said about active/passive income helped a lot because I think that is where my confusion was. Thanks!