Will a LLC be needed in this scenario?

3 Replies

Hey Everyone -

Background: I own a duplex in Minneapolis with a partner and both of our names are on the mortgage.

I am currently about to get a Triplex under contract with a different partner. The partnership will consist of 50/50 down payment then 50/50 on expenses, cashflow etc...

I will be able to qualify for a 30 year fixed rate and the partner won't need to go on the lease but do I purchase in the same way by just having my name on the mortgage or do I purchase under a LLC (which was my original plan and I have already created) to protect the duplex I have above?

Looking for some advice on what works best or the best way to structure without making it too confusing to manage once I begin to scale.

Thanks!

@Matt Zimmerman the answer depends on your financing type. Since you said 30 year fixed and commercial lenders do not offer that I'm guessing you are referring to a conventional loan. Fannie Mae & Freddie Mac prohibit you from getting the loan in the name of the LLC. There certainly are things you can do. In the end, you run some risk by using a conventional loan but not having both on the title. I doubt a non-attorney can tell you all the risks, so I would recommend you spend a few hundred dollars to get this figured out. If things go bad you will be glad you spent the money and either way it should make sleeping at night better.

One other note, there are some portfolio loans that do allow you to finance in an LLC, but they often want all owners 25% or more to guarantee the loan.


~Tim

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