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Buying Income Property As An LLC Or An Individual

JTinWA profile photo
  • Wednesday, August 06, 2003 @ 10:53 AM EDT
  • 3 Comments

Hi all;

(Long time reader, first time poster) smile

I'm fairly new to the apartment investing area of RE and I have a question I'm hoping the more experienced can help me with.

What is the best legal entity to use when buying an income property? I’m considering using an LLC to avoid personal liability issues. However, I’m wondering how mortgage companies evaluate your mortgage application when using an LLC. Would my good credit and assets still be considered? Or would only the assets of the LLC be considered when applying for the loan?

Thanks all for your help!
JT

Comments(3)

  • no photo
    ram5th August, 2003

    You'll likely be personally guaranteeing the loan, unless explicitly stated otherwise, so LLC is quite valid...just another tax return to file and more CPA fees...sometimes buying more liability coverage until such time as you attain critical mass of assets can be a less costly option...a good real estate attorney and CPA are in order here

  • no photo
    JTinWA5th August, 2003

    Thanks Ram;

    So, your saying that even if I use and LLC, I can still personally guarantee the loan, AND retain liability protection from mishaps through the LLC. That sounds like the way to go.

    Although, I'd like to find a mortgage where I don't need to personally guarantee the mortgage. I've read that if your debt service ratio is high enough and you pick the right lender that is possible. Not sure what people are finding in the real world though. While I will personally guarantee the mortgage if I need to, it just seems like a better option to not do it if possible.

    Thanks again!
    JT

  • no photo
    KyleGatton6th August, 2003

    There are a couple of ways to arrange that. I am sure there are more, but I only know of two. One is an "A" Trust and it will cost under 5 grand to set one up. Locate an estate lawyer to go into more detail. And the other is to set up a C-Corporation with credit and loan through the Corporation. It will take a while to build up the credit with the company, but once it is done you should be able to do what you were talking about.
    Both of these solutions will require a lot of time in setting them up, but you would be fully protected and able to get loans using a buffer rather then your credit.
    Like I stated before I am sure there are many other ways, but those are the only two that I am aware of.

    Good Luck,
    Kyle

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