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Updated 3 months ago on . Most recent reply
![Nicholas Cavato's profile image](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/2980359/1711364608-avatar-nicholasc555.jpg?twic=v1/output=image/crop=938x938@0x148/cover=128x128&v=2)
FHA vs Conventional with LLC involved
Looking for advice from you BP pros out there.
I will be purchasing either a single family residence or multi family residence home in the Cleveland, Ohio area no later than January 2025 and intended on purchasing using an FHA loan with an already formed Ohio LLC. I plan on doing a live in rehab, moving out of the residence after 1 year and doing a long term rental after moving out.
However, my lender told me I can not purchase a residence with an FHA loan under an LLC, which I now understand.
In general, is it more financially beneficial (cash on cash return) to purchase:
1. With an LLC using conventional loan
Or
2. As an individual with an FHA loan
I appreciate any additional guidance you all have for me.
Thanks!
Most Popular Reply
![Nick Belsky's profile image](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/2137474/1694293319-avatar-nickb510.jpg?twic=v1/output=image/crop=1694x1694@384x655/cover=128x128&v=2)
I am a little concerned with some responses here. The arguments for FHA versus conventional are fine and all, but one thing to be absolutely clear on is that Fannie/Freddie nor any other agency does NOT lend to entities. No lender will be able to close an FHA or conventional loan under an entity. Won't happen, no way in hell. Fannie does have a guideline that allows a property to be deeded over to an entity so long as the original borrower is also in the entity, but you have to wait 6 months of seasoning and maintain continuity of ownership.
Almost every single one of these loans also comes with an Acceleration Clause (Due On Sale Clause) that allows the lender to call your note due should you violate the terms of the note or guarantee. To be fair, I've never actually met anyone who says they've had a note called for this, but it is clearly in the loan docs and is the right of the lender to do so, should they choose.
Cheers!
- Nick Belsky
- [email protected]
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