Hi - I'm curious the best way to approach that initial investment purchase. Should I buy it and move it under an LLC? Buy it as an LLC? Any suggestions? Thanks.
CPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 871 votes
2y
@Michael Pannacciulli this is a common question and a good one :) The answer is it depends and it may not be your choice.
Generally, buying through your personal name can reduce the interest rate - commercial rates on LLC mortgages are usually higher but you can research this
Most LLCs on incorporation don’t have any credit so it may be difficult to find.a lender
If you own the property in your personal name you are exposing yourself to more risk and will want to transfer the property into LLC as soon as you can
If you own property in your personal name and transfer to LLC the lender may not allow or can call the entire loan
LLC or personal you need insurance
One solution to above is to buy the property in your personal name and immediately transfer it to the LLC after closing, but you will need to get pre-approval from lender before you buy property and plan to do this since not all of them allow this. The lender can call the loan on transfer - this is a risk and you need to be careful. Finally, if you wait too long to transfer the property from personal to LLC there may be taxes on transfer.
The transfer is called a "Quit Claim". If you search the forums for this topic using the magnifying glass feature in top right corner of your screen on BiggerPockets you will find a lot of discussion on "Quit Claim" "Buying through LLC" etc.
.
.
.
This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.
@Michael Pannacciulli this is a common question and a good one :) The answer is it depends and it may not be your choice.
Generally, buying through your personal name can reduce the interest rate - commercial rates on LLC mortgages are usually higher but you can research this
Most LLCs on incorporation don’t have any credit so it may be difficult to find.a lender
If you own the property in your personal name you are exposing yourself to more risk and will want to transfer the property into LLC as soon as you can
If you own property in your personal name and transfer to LLC the lender may not allow or can call the entire loan
LLC or personal you need insurance
One solution to above is to buy the property in your personal name and immediately transfer it to the LLC after closing, but you will need to get pre-approval from lender before you buy property and plan to do this since not all of them allow this. The lender can call the loan on transfer - this is a risk and you need to be careful. Finally, if you wait too long to transfer the property from personal to LLC there may be taxes on transfer.
The transfer is called a "Quit Claim". If you search the forums for this topic using the magnifying glass feature in top right corner of your screen on BiggerPockets you will find a lot of discussion on "Quit Claim" "Buying through LLC" etc.
.
.
.
This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.