Investor · San Diego, CA · Member since 2016 · 69 posts · 9 votes
Hi all BP members,
I would like to ask your guidance or your opinion about the below situation. I am very new to REI and I am reading Brandon's books and BP forums.
Currently, I have my primary residence with VA loan located in Norfolk, VA. So, in order to buy investment property, what should I use? Should I use my personal name or should I set up the business and use the business name?
What kind of entity will be suitable to get the financing? I am thinking of getting bank/mortgage loan. My credit is not very good and it is about 660 due to hard pull, low credit history and recent late payment for macy's credit card (only $35 damn!). I am trying to build up my credit now.
My ideal plan is to do with BRRRR in hampton road area and I am planning to get start the process next year.
As said there are pros and cons. Personally I want all by business assets in a separate entity from myself. That may not be the right choice for you.
Keep in mind it is more difficult to get financing for a "company" If you own property in an LLC, S Corp. etc you are going to need a commercial loan and rates will be higher, down payments will be larger and in general harder to get
Hello Han Oo . A lot of people ponder this question. If you run a search on the BP site you'll no doubt see many threads discussing the pros and cons. It's good that you're planning ahead, giving yourself time to arrive at a decision as well as improve your credit score.
In a nutshell there are two schools of thought. Some will argue that it's ok to buy in your own name and get a general liability insurance policy to cover you and the properties. Others will say you ought to use a legal entity for asset protection. Generally speaking most would suggest an LLC for it's the simplest entity type to creat and keep. It would be wise obtain a GL policy for the entity and its holdings as well.
The choice of using a separate entity also has implications on the type of loans that might available to you - i.e conventional residential loans (Fannie & Freddie) can commercial. Either way the lender will qualify you as a borrower, so improving you're credit rating is a plus. The alternative would be using an asset-based lender. The loan terms are not as attractive though.
Think about what it is that you want to accomplish with your investing. How large of a portfolio do you plan to grow to? How will you protect your investments? Is separating your investments from personal assets important to you? As you build your team of advisors consult with your CPA, real estate attorney, insurance agent and lender about this topic to help guide you to a decision that's right for you.
Good investing.
Ask a lawyer but pretty much even if you started an LLC you would still have to use you personal credit because the banks will not do business with a business that just start and no credit but I will say start it to build your business credit as you build your personal, and can move it over later
As said there are pros and cons. Personally I want all by business assets in a separate entity from myself. That may not be the right choice for you.
Keep in mind it is more difficult to get financing for a "company" If you own property in an LLC, S Corp. etc you are going to need a commercial loan and rates will be higher, down payments will be larger and in general harder to get
You are going to want some form of an entity, but it is your credit that will determine if you get the loan. This becomes less true if you get into big commercial loans, then loan brokers can help to get you loans based on the asset. For the single family house and BRRR techniques you will be the key to financing.
Hello Han. I work with investment properties in Indiana. All of my clients that have wanted to get a mortgage loan on an investment property have had to do it in their personal name and not an LLC.
That being said---later on, some of them have deeded it over to the LLC that they set up.
Real estate brokers cannot give legal advice. This is just what I have experienced in quite a few of investment transactions.
You may want to start a list of questions for a mortgage broker and/or a real estate attorney.
Good job for planning in advance rather than back-tracking later! :-)
I would like to ask your guidance or your opinion about the below situation. I am very new to REI and I am reading Brandon's books and BP forums.
Currently, I have my primary residence with VA loan located in Norfolk, VA. So, in order to buy investment property, what should I use? Should I use my personal name or should I set up the business and use the business name?
What kind of entity will be suitable to get the financing? I am thinking of getting bank/mortgage loan. My credit is not very good and it is about 660 due to hard pull, low credit history and recent late payment for macy's credit card (only $35 damn!). I am trying to build up my credit now.
My ideal plan is to do with BRRRR in hampton road area and I am planning to get start the process next year.
Thank you in advance. Have a great day.
V/r
Han
Interested to know if how you did work your deals? Oddly this post was on the side of my "Similar Posts You May Like" yet it was a few years old!