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Mayur Patel
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Buying a property under personal FHA loan and renting under LLC

Mayur Patel
Posted

Looking for advice. I am looking to invest in PA. However, getting loans under LLC is very hard in PA. As a result, seeking option to purchase the property with 20% down with a FHA loan. Getting the mortgage under my name; then rent the properties with agreement with the LLC.

LLC would be renting the property first from me, and then subletting under its own agreement. Please let me know if that is allowed according to PA Laws.

Thank you.

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Shanequa J.
  • Realtor
  • Houston, TX
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Shanequa J.
  • Realtor
  • Houston, TX
Replied

Do you plan on buying a multi family property because you can't use an FHA mortgage to purchase a single family residence as a rental.

What you described is unnecessary. Why do you want to rent from the LLC anyway?

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Benjamin Aaker
Professional Services
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  • Rental Property Investor
  • Brandon, SD
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Benjamin Aaker
Professional Services
Pro Member
  • Rental Property Investor
  • Brandon, SD
Replied

I don't know PA laws, but I don't see why you couldn't do that. The bigger question is why? You might be thinking the LLC would offer you more liability protection when set up that way, but whether you own the property and rent to the LLC or the LLC owns it and you are the sole-proprietor of the LLC in its operating agreement will probably be the same in terms of ability for claimants to find you.

If you are paying 20% down, you should be able to get a commercial loan in the name of the LLC. This'll give you some liability protections that you seek. With that amount down, you don't need an FHA loan.

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    Bill B.#3 1031 Exchanges Contributor
    • Investor
    • Las Vegas, NV
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    Bill B.#3 1031 Exchanges Contributor
    • Investor
    • Las Vegas, NV
    Replied

    Erase everything in your plan concerning an LLC and proceed. You are spending time effort and money for ZERO benefit.

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    Charlie MacPherson
    • China, ME
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    Charlie MacPherson
    • China, ME
    Replied
    It's not clear in your post, but if you're planning to buy with an FHA loan and then rent the property out, you might be committing mortgage fraud.

    I'm no longer a Realtor, but as I recall, FHA is for owner-occupied properties only.  I believe that it has to be OO for 12 months, barring extraordinary circumstances, like getting transferred out of the area for work.

    FHA has a whole department dedicated to "occupancy fraud" and given that it's a felony, I'd steer very clear from it.