Financing And LLCs
I want to get started making some real estate investments (likely rehabs and/or rental properties) and would like to do so through a LLC. However, I understand that I would have to pay a much higher mortgage rate if I take title via a LLC even if I am personally liable for the loan.
Any ideas on how to get decent financing and still use a LLC?
You won't be paying much higher rates - you will be paying commercial rates, as most banks allow LLC to be on title only for the commercial mortgages. Your alternative is to hold the property in trust and have the LLC be the beneficiary - that way you can get residential-type financing for your deals.
It is hard to get financing much less good financing terms with a new LLC. You can buy it in your name and deed it to the LLC, your financing terms should be more favourable.
[addsig]
OK, I guess I could buy the property in my name and deed it to the trust (with my LLC as beneficiary). I think that in most places there are no transfer taxes on this type of transfer.
If I deed it to my LLC, would this normally trigger transfer taxes?
Good question! I am trying to figure out the same thing for transfer taxes in Pennsylvania. Anyone with a clue as of how this works, any info would be much appreciated!
Thanks!
JeanMarie
Hello,
When you use this type of set up, by holding the property in a trust and having the LLC be the benificiary, how does the rental income and tax benifits work? Does the cash still flow through the LLC. Sorry about being naive on this as I have just set up a LLC and am trying to figure out how to move it to the LLC as well. The property I am renting is our current residence with owner occupied financing attached. We moving in a couple of weeks and the property will be rented starting November 1. Can I have the rental checks run through my LLC. I have not yet created a trust. Any advise on how to do this would be great. Thanks
Brian
Do you get the mortgage in the trust name?
Quote:
On 2004-09-27 16:22, CCinvestor wrote:
OK, I guess I could buy the property in my name and deed it to the trust (with my LLC as beneficiary). I think that in most places there are no transfer taxes on this type of transfer.
If I deed it to my LLC, would this normally trigger transfer taxes?
Yes, this could very well mean extra taxation and affect your insurance policy as well. But more worrisome is that your lender could exercise their Due On Sale (DOS) clause and call the entire loan balance due because you transferred ownership. Since your name stays on the loan it's your credit history on the line; that is, unless your LLC can formally "assume" the loan, but that gets right back to your LLC being unable to qualify for the financing from the beginning. Talk with your lender before attempting to transfer title to another entity.
As has already been suggested, transfer title into a Land Trust naming yourself as trustee and then assign beneficial interest to your LLC. Normally you want an anonymous person as trustee, but since your name will already be in the public records from the original purchase and the mortgage you might as well just name yourself as trustee. It will look like an estate planning move to your lender (should they discover) and shouldn't raise any red flags.