Is it better to finance a foreclosed rental property as an individual or LLC?
Aug 08, 2009
in
Commercial Property Loans
My family and I are going to buy a 2 unit rental property next door to us that has been foreclosed on. I was wondering if we should try to get a commercial loan in one of our names or if we should form a corporation first and do it that way? We would like to eventually make a business out of this.
Thanks in advance 
Like this post? Subscribe to my RSS feed and get loads more!
3 comments
trblmkr30 on August 8, 2009 at 2:43 am
The problem you will have if you plan to purchase the home in the name of an LLC is that the LLC does not have any credit, and therefore will have a very difficult time getting a good loan. It is possible for you to be the guarantor for the loan, but why bother when you can just buy it in your name and then Quit Claim it into the LLC later.
It’s legal to do it this way, but the lender does have the opportunity to call the note due immediately on their Due on Transfer clause, but most lenders will not excersize this if they’re getting paid regularly and on time.
Spock (rhp) on August 8, 2009 at 2:43 am
talk to your banker/mortgage banker/broker
but do not delay so much that you miss the deal
odds are that even if you set up an LLC, your banker will want a personal guarantee anyway or no mortgage.
M.S.C. on August 8, 2009 at 2:43 am
Most lenders will not lend to LLC’s. Commercial loans are much more complicated to get. The LLC thing only works if you own more than 10 properties, have a CPA, owned the properties for over 2 years and can supply paperwork that you are the owner of the LLC and are authorized to sign.