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I am in the process of getting my financing in order to purchase rental properties. I am speaking with a local credit union about getting a unsecured loan ($40000 or less)which should not be a problem in obtaining. My real estate attorney says I should look into a commercial loan because it does not affect your credit. Anybody have advice on this?



You will need 5 or more units in order to get the commercial loan. You cannot get a commercial loan on SFH unless it was a group of homes. I did get a commercial loan on an 8 residential property portfolio. None of my commercial loans have ever shown up on my credit report even though I have personally signed.

Your Atty is correct. However most of us, when starting out, are not going to be able to do this. There are many different reasons from area, to amount, your credit, cash on hand, have you done this before, taxes etc.

You can take the $40K and by properties with all cash that you own in your name. Then you can put a mortgage on them under your LLC or Corp.

My guess is you have no properties now and probably not as many assets now as you will have in the future. And you probably don't have a company.

My suggestion would be to not worry about a company until you have 4 or 5 properties. Once you have multiple assets then get a company. However make sure that you understand all the nuances of running your company as a company and why you do what you do to protect your assets. Most don't. They get a company because someone told them they had to have one.

Having said all this just know that when you buy your first few properties more than likely they will be in your name and mortgaged in your name as well.

Hope this helps.

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@Jonathan Brown

Why not go the route of conventional financing? You can start with as little as 15% down for a SFR and 25% down for a MFR.

hey jerry 

My reasoning for going the unsecured loan route were for these reasons

: my price range is below mortgage minimums, with a unsecured I don't have to put anything down, no closing costs, and I can just include renovation costs in the loan. 

Still not saying this is the best route just my reasoning right now.

Will take any advice 

Thanks jonathan