Personal Loans or LLC

Rental Property Investor · Waterford, MI · Member since 2023 · 30 posts · 4 votes

I'm a new investor preparing to purchase my first investment property soon. Eventually, I would like to place my properties into an LLC, but for now I feel like I need to purchase my first property the conventional way; get a loan through the bank. From what I've read, new LLC's are probably not going to obtain financing. Is this the way to go? Any advice or feedback is appreciated.

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Anna Beckerleg

Real Estate Broker · Milwaukee, WI · Member since 2018 · 3 posts · 4 votes

Most LLC's are not eligible for traditional residential mortgages. You could go with a commercial mortgage instead if you want to purchase with your LLC but that may not be the terms you want. You could always do a quit claim after you purchase to transfer ownership to your LLC but you'll want to confirm with your lender that is OK and won't contradict the wording in your mortgage agreement.

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Anna Beckerleg
Real Estate Broker · Milwaukee, WI · Member since 2018 · 3 posts · 4 votes
3y
Most LLC's are not eligible for traditional residential mortgages. You could go with a commercial mortgage instead if you want to purchase with your LLC but that may not be the terms you want. You could always do a quit claim after you purchase to transfer ownership to your LLC but you'll want to confirm with your lender that is OK and won't contradict the wording in your mortgage agreement.
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Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votes
3y
Hey Kim,
Are you planning on purchasing your primary residence under an LLC or an investment property?
Some DSCR lenders are okay with new LLCs as long as you own a primary residence.
[email protected]818-269-7983
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Eliott Elias
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
3y
Your LLC will never be able to obtain financing until it is open for 2 years or you are using DSCR & hard money.
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Mark SeverinoPro Member
Rental Property Investor · Dallas, Texas (TX) · Member since 2014 · 79 posts · 25 votes
3y
It's your first property, I say go ahead and buy it in your name.
Not that an LLC is the most complex thing in the world to create, but to PROPERLY maintain that LLC add a bit more intricacy to an already foreign process.
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Kim Frantum
OP
Rental Property Investor · Waterford, MI · Member since 2023 · 30 posts · 4 votes
3y
Quote from @Erik Estrada:

Hey Kim,
Are you planning on purchasing your primary residence under an LLC or an investment property?
Some DSCR lenders are okay with new LLCs as long as you own a primary residence.

HI Erik,
I appreciate your response! I'm planning on purchasing an investment property. I do currently own a primary residence.
My goal is to purchase multiple properties in the next couple of years and eventually look into multi-family properties. I'm thinking of purchasing the first couple of properties in my name and eventually deed them to my LLC. Once I have a decent portfolio I can start to obtain financing directly through the LLC.
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Kim Frantum
OP
Rental Property Investor · Waterford, MI · Member since 2023 · 30 posts · 4 votes
3y
Quote from @Mark Severino:

It's your first property, I say go ahead and buy it in your name.
Not that an LLC is the most complex thing in the world to create, but to PROPERLY maintain that LLC add a bit more intricacy to an already foreign process.

I appreciate your insight. Thank you!
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Kim Frantum
OP
Rental Property Investor · Waterford, MI · Member since 2023 · 30 posts · 4 votes
3y
Quote from @Eliott Elias:

Your LLC will never be able to obtain financing until it is open for 2 years or you are using DSCR & hard money.

Good to know. Thank you!
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Kim Frantum
OP
Rental Property Investor · Waterford, MI · Member since 2023 · 30 posts · 4 votes
3y
Quote from @Anna Beckerleg:

Most LLC's are not eligible for traditional residential mortgages. You could go with a commercial mortgage instead if you want to purchase with your LLC but that may not be the terms you want. You could always do a quit claim after you purchase to transfer ownership to your LLC but you'll want to confirm with your lender that is OK and won't contradict the wording in your mortgage agreement.

Thank you for the advice and guidance! This was exactly my thought, eventually deeding the properties to my LLC. Is it usual practice for a lender to agree to these terms?
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Jim WellingtonBusiness Member
Real Estate Agent · Saint Clair Shores, MI · Member since 2022 · 73 posts · 51 votes
3y
Hi Kim. I own a DSCR lending company, Level Up Capital. There are advantages to doing the loan to your LLC. One is the loan goes to the LLC and you're the guarantor. This does help provide barriers and negative impacts to your personal DTI ratios. The underwriting process is also more streamlined. We don't require tax returns, pay stubs, or w2s/1099s. That said the rates are generally a bit higher. You'll get a better rate and terms in your personal name. Happy to schedule a call to further discuss. Thanks!
[email protected]586-204-2010
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Darnell Lockett
Real Estate Consultant · Miami · Member since 2023 · 165 posts · 62 votes
3y
That's not true at all @Kim Frantum. New LLC's can get financing right away. I highly encourage you to not only talk with Banks, but Mortgage Lenders and Mortgage Brokerages as well. All have different experiences and services they can offer. We're a Commercial and Residential Mortgage Brokerage firm, but always encourage potential clients to shop us around. An informed investor is a buyer is a better client...imo! Today...banks, lenders and brokers all have some forms of investor loan programs they can offer..which don't take your personal income or debt into account (at least we have them anyway). You can hold as many investment properties as you want to in an LLC when you use these types of DSCR loan programs.
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Darnell Lockett
Real Estate Consultant · Miami · Member since 2023 · 165 posts · 62 votes
3y
Quote from @Anna Beckerleg:

Most LLC's are not eligible for traditional residential mortgages. You could go with a commercial mortgage instead if you want to purchase with your LLC but that may not be the terms you want. You could always do a quit claim after you purchase to transfer ownership to your LLC but you'll want to confirm with your lender that is OK and won't contradict the wording in your mortgage agreement.

Hi @Anna Beckerleg. If Kim uses a DSCR loan she's able to close in a newly formed LLC right away. We do them all the time for our investor clients. No personal income needed and no personal debt take into account. They are great for 1-4 unit residential properties.

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Kim Frantum
OP
Rental Property Investor · Waterford, MI · Member since 2023 · 30 posts · 4 votes
3y
Quote from @Jim Wellington:

Hi Kim. I own a DSCR lending company, Level Up Capital. There are advantages to doing the loan to your LLC. One is the loan goes to the LLC and you're the guarantor. This does help provide barriers and negative impacts to your personal DTI ratios. The underwriting process is also more streamlined. We don't require tax returns, pay stubs, or w2s/1099s. That said the rates are generally a bit higher. You'll get a better rate and terms in your personal name. Happy to schedule a call to further discuss. Thanks!

Good to know! I'll definitely reach out when the time comes. Thank you!
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Kim Frantum
OP
Rental Property Investor · Waterford, MI · Member since 2023 · 30 posts · 4 votes
3y
Quote from @Darnell Lockett:

Quote from @Anna Beckerleg:

Most LLC's are not eligible for traditional residential mortgages. You could go with a commercial mortgage instead if you want to purchase with your LLC but that may not be the terms you want. You could always do a quit claim after you purchase to transfer ownership to your LLC but you'll want to confirm with your lender that is OK and won't contradict the wording in your mortgage agreement.

Hi @Anna Beckerleg. If Kim uses a DSCR loan she's able to close in a newly formed LLC right away. We do them all the time for our investor clients. No personal income needed and no personal debt take into account. They are great for 1-4 unit residential properties.

This is extremely helpful! I will reach out when I'm ready so we can talk about options. Much appreciated!
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Darnell Lockett
Real Estate Consultant · Miami · Member since 2023 · 165 posts · 62 votes
3y
Quote from @Kim Frantum:

Quote from @Darnell Lockett:

Quote from @Anna Beckerleg:

Most LLC's are not eligible for traditional residential mortgages. You could go with a commercial mortgage instead if you want to purchase with your LLC but that may not be the terms you want. You could always do a quit claim after you purchase to transfer ownership to your LLC but you'll want to confirm with your lender that is OK and won't contradict the wording in your mortgage agreement.

Hi @Anna Beckerleg. If Kim uses a DSCR loan she's able to close in a newly formed LLC right away. We do them all the time for our investor clients. No personal income needed and no personal debt take into account. They are great for 1-4 unit residential properties.

This is extremely helpful! I will reach out when I'm ready so we can talk about options. Much appreciated!
You're welcome Kim. I hope this helps. Feel free to reach out anytime.
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Mohammed Rahman
Real Estate Broker · New York, NY · Member since 2020 · 2k+ posts · 1k+ votes
3y
Hi @Kim Frantum - congrats on getting close to the finish line. I personally wouldn't worry too much about the whole "buy your property under an LLC" debate for your first couple of properties. Once you scale, I think that's when it starts to matter.
Traditional lenders aren't going to provide a conventional residential loan to an LLC, let alone someone they've never done business with.
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