LLC's and taxes advice

[Paige Rob]

Can someone provide more context to statements like: our loan will never report to a credit bureau because it is a private loan so DTI will not be affected....won't it show on a fraud credit report, the deep dive report?

also, within same context: we have some investors with over 100 investment properties in their LLC and those loans never affect the DTI analysis.

So is the LLC doing it's own business taxes like a C or S corp and therefore the properties are not on personal taxes on a schedule E? So when seeking to refi say a primary and the client has and LLC, don't they disclose the nature/business of the LLC?

I'm trying to understand the pro's and con's of using LLC's. I have several rentals I purchased years ago with loans on them to me. I live in CA and the rentals are in other states, not here. If I understand this correctly I can either form an LLC in each state and also have to pay CA a franchise fee for each LLC at $800 a year or form one LLC in NV or DE for the investments/investment loans. Either way, I then have to treat the LLC as a C or S corp, do taxes on that, have it reflected on my personal taxes not on a schedule E and still have the CA fee. A savvy lender will never want to deep dive into the LLC that is for reflected on personal taxes that holds real estate investments?

If anyone can shed light on any of this, I'd appreciate it. 

[Grant Schroeder]

Quote from @Paige Rob:

Can someone provide more context to statements like: our loan will never report to a credit bureau because it is a private loan so DTI will not be affected....won't it show on a fraud credit report, the deep dive report?

also, within same context: we have some investors with over 100 investment properties in their LLC and those loans never affect the DTI analysis.

So is the LLC doing it's own business taxes like a C or S corp and therefore the properties are not on personal taxes on a schedule E? So when seeking to refi say a primary and the client has and LLC, don't they disclose the nature/business of the LLC?

I'm trying to understand the pro's and con's of using LLC's. I have several rentals I purchased years ago with loans on them to me. I live in CA and the rentals are in other states, not here. If I understand this correctly I can either form an LLC in each state and also have to pay CA a franchise fee for each LLC at $800 a year or form one LLC in NV or DE for the investments/investment loans. Either way, I then have to treat the LLC as a C or S corp, do taxes on that, have it reflected on my personal taxes not on a schedule E and still have the CA fee. A savvy lender will never want to deep dive into the LLC that is for reflected on personal taxes that holds real estate investments?

If anyone can shed light on any of this, I'd appreciate it. 

Great questions @Paige Rob. For a conventional loan:

1) If you are not personally obligated on a loan and it is held in an LLC where you file a 1065 Partnership return, the lender will only evaluate the K-1s coming from your LLC since you are not personally obligated on the loan.

2) If you are personally obligated on the loan (it shows up on your credit report) and the property is in your LLC (filed on form 8825 of your 1065 Partnership return), then the lender needs to account for the loan in your DTI, or we can try to remove the debt payment from your DTI if we can demonstrate that the business has paid the mortgage for the past 12 months, even if you are personally obligated. This would require showing mortgage interest on your Form 8825 and Underwriting also typically wants to see 12 months of mortgage payment withdrawals out of the LLC business account showing that the business pays the mortgage, not you personally from a personal account.

This is a good topic to discuss with your CPA and your Loan Officer if you are switching properties form Sched E to your 1065 LLC Partnership return or putting any property you buy into an LLC. You want to make sure you have a good team in place who can help you be loan and tax advantaged with your tax filing. Many times, your self employment income or rental income on tax returns can make or break your DTI qualification for a loan.

I would be glad to connect with you further and dive into the details of your situation if that would be helpful?