If I were to start an LLC, how do I go about buying investment properties through the company? What are the advantages of investing through a business rather than individually?
How does someone buy invest real estate under a company?
01
Apr
loanmasterone
April 1, 2010 at 3:26 pm
If you form a corporation to buy properties that is fine. The corporation is like an individual. It can buy properties in it’s name, record deeds and titles in it’s name the same as an individual. You as an officer would have to make the decisions for the corporation.
Lenders will want the corporation to qualify as if it was an individual.
If you have a spanking brand new LLC this corporation has no assets, no income, no credit report (Dun & Bradstreet). Since this spanking brand new LLC has none of the above you will not be able to get a mortgage loan.
You may go ahead and form the LLC and place it on the shelf for the time being. It could serve you in the future and would be an older corporation, when you decide to use the LLC.
Some banks will lend you money through the LLC, but you must sign as the co-signer since this LLC does not qualify. This is called a recourse loan since you as an individual will be required to pay the mortgage for the corporation in the event that the corporation can not repay the monthly mortgage.
You may purchase the property, qualify for a mortgage loan as an individual and upon closing of the mortgage loan transaction quit claim the property to the LLC. Thus the mortgage responsibility would be yours, but the property would be owned by the corporation. At times the closing escrow will also do a courtesy transfer to your LLC for you without charge.
Even after the LLC is qualified and able to qualify for a mortgage loan the lender might still require an individual to sign as a co-signer.
Some lenders will require a well qualified LLC to borrow money on it’s own merit, this is called a non-recourse loan as no one has to act as a co-signer for the LLC.
The advantages will not appear until you have several units or house, thus causing you to want to protect your personal assets, such as your personal home, cars and income and bank accounts.
You might also look into a family trust, Self directing IRA accounts as a vehicle to use in your investment properties. They are easier to set up and at times might be more tax friendly than a LLC or other types of corporations.
For tax and legal matters you should consult with your tax consultant and attorney.
I hope this has been of some use to you good luck.
“FIGHT ON”