Two friends and I plan to flip a house. Our plan is to use a mortgage. To do so, should we set up an LLC? Or, is another type of entity or partnership agreement a better way to go? I've read that LLCs can have limited options in obtaining mortgages and good rates. In other words, how should a small group of people pool their money and set up a legal agreement (entity) in order to obtain a mortgage and buy a house to flip?
@Josh Lyons Yes you want to use an LLC to hold title to the property. You can all be the members.
All you need is a short term interest only loan. No need for a mortgage if you're flipping.
Best bet for financing is to talk to a bunch of local commercial banks and get a loan in the name of the LLC with you as loan guarantors. They all have different terms and rates so you need to shop around.
As Greg has more or less stated, you will need to shop around to find lenders who are happy to lend to an LLC.
The rates will be aligned with the project type. A development (refurbishment) is not going to be right for a traditional 30 years loan for a development. There are different loan products for different types of risks and project types. So, comparing rates is tricky if you are comparing loans for apples and loans for carrots.
@Greg Dickerson thanks for answering that for him because it also answered it for me because I had the same question in my mind! 🤘🏽