LLC or Personal Loan - Shirt Term Rental

Short-Term & Vacation Rental Discussions
4yFollow

LLC or Personal Loan - Shirt Term Rental

Ray Martinez
Investor · Los Angeles CA, USA · Member since 2020 · 28 posts · 0 votes

Hello everyone,

I would to start a short term rental business and I've started to look at properties.

How difficult will it be to fund the loan for the property when buying as a LLC?

As of now, I've put away about a 1/3 of the purchase amount for a down payment. 

Is this the right approach or should I finance under my own name?

Also, what info should I have prepared to fund under LLC?

Thanks everyone!

0Reply
34 views

Most Popular Reply

John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
4y

Don't buy in an LLC unless you are paying all cash.

Buy in you name with a mortgage, maybe a 10% down second home loan if you will use the property some.

The mortgage and insurance are your first 2 lines of defense. If you need more get an umbrella policy.

2Reply
See this reply in the discussion

12 Replies

Jump to latestLatest
  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    4y

    Don't buy in an LLC unless you are paying all cash.

    Buy in you name with a mortgage, maybe a 10% down second home loan if you will use the property some.

    The mortgage and insurance are your first 2 lines of defense. If you need more get an umbrella policy.

    2Reply
  • Collin HaysBusiness Member
    Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
    4y

    First of all, congratulations! Can you explain why you are wanting to set up an LLC? Is it to attempt to shield you from liability? If so, as John said, you can do fine by simply making sure you have an adequate personal umbrella policy.

    [email protected]806-672-7102
    SMOKY MOUNTAIN FALLS INC.51 Review
    WebsiteView Page
    0Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y

    You don't need an LLC.....I've done it both ways. Just make sure your insurance is the right kind and is adequate. Use your $$ to buy more properties.....

    0Reply
  • Ray Martinez
    OP
    Investor · Los Angeles CA, USA · Member since 2020 · 28 posts · 0 votes
    4y
    Originally posted by @Collin Hays:

    First of all, congratulations! Can you explain why you are wanting to set up an LLC? Is it to attempt to shield you from liability? If so, as John said, you can do fine by simply making sure you have an adequate personal umbrella policy.

    Thank you!

    Yes, the purpose would be to shield from liability. 

    0Reply
  • Ray Martinez
    OP
    Investor · Los Angeles CA, USA · Member since 2020 · 28 posts · 0 votes
    4y
    Originally posted by @John Underwood:

    Don't buy in an LLC unless you are paying all cash.

    Buy in you name with a mortgage, maybe a 10% down second home loan if you will use the property some.

    The mortgage and insurance are your first 2 lines of defense. If you need more get an umbrella policy.

    Thanks for the advice John. Any idea what lenders are looking for as a down payment? I've read 30% in a couple of articles which led me to believe I would need more upfront to get started.

    0Reply
  • Collin HaysBusiness Member
    Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
    4y

    Ray, banks are going to consider this a commercial loan, so it will typically range from 20-25% down, depending on the bank.  My bank used to require 25%, but as we’ve worked together and they’ve become more comfortable with me, it’s 20%.

    [email protected]806-672-7102
    SMOKY MOUNTAIN FALLS INC.51 Review
    WebsiteView Page
    0Reply
  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    4y
    Originally posted by @Ray Martinez:
    Originally posted by @John Underwood:

    Don't buy in an LLC unless you are paying all cash.

    Buy in you name with a mortgage, maybe a 10% down second home loan if you will use the property some.

    The mortgage and insurance are your first 2 lines of defense. If you need more get an umbrella policy.

    Thanks for the advice John. Any idea what lenders are looking for as a down payment? I've read 30% in a couple of articles which led me to believe I would need more upfront to get started.

     Depends on the type of loan.

    0Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y
    Originally posted by @Ray Martinez:

    Yes, the purpose would be to shield from liability. 

    But it doesn't do any more than a good insurance policy.....

    0Reply
  • Gerald Pitts
    Lender · Asheville NC · Member since 2016 · 469 posts · 317 votes
    4y

    Originally posted by @Ray Martinez:
    Originally posted by @John Underwood:

    Don't buy in an LLC unless you are paying all cash.

    Buy in you name with a mortgage, maybe a 10% down second home loan if you will use the property some.

    The mortgage and insurance are your first 2 lines of defense. If you need more get an umbrella policy.

    Thanks for the advice John. Any idea what lenders are looking for as a down payment? I've read 30% in a couple of articles which led me to believe I would need more upfront to get started.

    0Reply
  • Mike S.
    Investor · Broward County, FL · Member since 2018 · 1k+ posts · 938 votes
    4y
    Originally posted by @Bruce Woodruff:
    Originally posted by @Ray Martinez:

    Yes, the purpose would be to shield from liability. 

    But it doesn't do any more than a good insurance policy.....

    Not true.

    A liability insurance is a must but will not cover you against all risks.

    For inside liability risks, a liability insurance may cover you up to their limit, but your personal assets are at risk if your insurance is refusing to cover you (read the many, many pages of exclusions of your policy) or if the claim exceed your policy limit.

    For outside liability risks, if you don't have coverage from your personal liability and/or umbrella you may not be covered either.

    An LLC put your assets in different boxes and insulate each box from each others. So you are limiting the total risks to one box at a time.

    Insurances, asset striping and entities are all complementary but not similar asset protection tools. All of them need to be used in conjunction for a comprehensive structure giving you asset protection.

    Now some people will tell you they are not using insurance nor any asset protection at all and have done well for years, some other will tell you horror stories about losing their shirt on a devastating lawsuit. At the end of the day, it is your own decision on what risk you want to assume and that will keep you sleep at night.

    0Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y

    @Mike S. Yeah, I get ya, I've had LLCs and S Corps before and I understand the value in them. I don't believe they are as necessary for a small business as they would be for a larger operation. Like you say, it's all about perceived risk and your ability to handle it....

    0Reply
  • Collin HaysBusiness Member
    Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
    4y

    I had an alleged slip-and-fall at one of my cabins a few years ago, with a broken leg. Highly suspicious, but the settlement was $250,000 if I remember correctly.  The policy on my cabin wrote the check.

    Accidents happen. And when they happen on your property, they’re coming after you to redeem their lottery ticket.

    [email protected]806-672-7102
    SMOKY MOUNTAIN FALLS INC.51 Review
    WebsiteView Page
    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free