Use Holding Company LLC To Apply For Mortgages

[Tommy Dee]

Getting started in real estate investing.  Trying to figure out how to structure what I'm hoping to build.

I've owned a decently successful online retail business for 10 years.  I understand, and have read more about this in regards to real estate, the problems with obtaining business credit.

My initial thought is to register a new LLC as a holding company. I'd do the regular routine of tradelines and charge cards to build some credit. Then, I'd find a property and apply for a mortgage under the LLC. I realize that I'd probably have to give a personal guarantee on this. The tricky part comes when I'm ready for property #2. Hopefully, I'd be able to get the next mortgage, as long as I have good cash flow, through the LLC. It may take more than one property under my belt. Regardless, if I wanted to keep separate LLC's for each individual property, could I make that happen? I'm guessing there are due on sale clauses if I tried to quit claim from Holding Company LLC to Property A LLC?
 
I thought I might just spin off my current business to it's own new LLC and use my current LLC, with it's credit, as my Real Estate Holding LLC.  But, regardless, the same questions arise.

I realize I may be making the real estate business sound much simpler than it is, and will of course talk to a CPA an attorney before I do anything.  But, just like planning things as much as I can.

Thoughts?

Thanks!

[Tim Delaney]

@Tommy Dee I’ve applied for and received real estate loans in the name of LLCs that are brand new. Of course I had to sign personally as well. The banks only care that the property will make money and that you have a decent financial track record to back up the loan.

As someone else pointed out though, loans to LLCs are almost always commercial loans with shorter amortization periods, higher interest rates and shorter terms, so in the interest of just getting yourself started sooner rather than later, just buy your first couple properties in your own name.