Financing Impact on Personal Credit

2 Replies

So, I've listened to about 100 BP podcasts and am beginning to develop a mind for real estate investing. I understand and love the idea of the BRRRR strategy, but I'm getting hung up on a mindset thing here. If I have real estate in an LLC, does the bank use my personal credit to evaluate my credibility as a borrower or do they use my LLC alone? If they use my personal credit, how do you borrow to acquire properties knowing that it's going to offset your debt to income ratio and make you more of a risk (on paper) to a lender?

Most of the banks that I know will only lend to a person and not LLC. But some banks told me they will be okay if I transfer the property to the LLC after I purchased it. But I am still reliable if it is foreclosed.

People run into the problem of LLC and DTI all the time with banks, that's why people seek other financing: Private money, hard money, portfolio lender that only look at your asset and not your W2 income.

@Tyler Relph - Personal credit is always a factor even when lending under an LLC. This is because the loan has to be personally guaranteed. Think of it this way, the loan is to the LLC but you personally are a cosigner. As far as debt to income goes, If you are using an LLC then you are likely working with a commercial lender. Commercial guys do not care so much about debt to income. We care more about debt service coverage ratio (DSCR) this is determined by the profitability of the property. Hope this makes since. If not feel free to reach out to me.

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