Buying Rental Property in LLC or Personal Mortgage

[Misty Monk]

Is it best to buy rental property in LLC and personally guarantee loan or get a personal mortgage ? What loan products are there and how do they compare to a mortgage?

[Kevin Romines]

If you are wanting to hold the property in the name of the LLC, but get the best rates and terms, then you will need to buy the property in your personal name using a Fannie Mae loan. Fannie Mae, allows you to transfer the property to an LLC after closing. The borrowers are required to be the majority members of the LLC. If so your good to go and not at risk of the due on sale clause being violated and the loan called due. Fannie changed their guidelines 2 years ago to now allow this.

The next alternative is to do a Non-QM loan. Most Non-QM loans can be done in the name of the LLC with a personal guarantee. The interest rates are a little bit higher than Fannie Mae, but they don't have mortgage insurance required. Also, the max LTV on 1-4 units is 85% versus Fannie at 15% down on a SFR and 25% down on 2-4 units. So you can get a bit of a break on the down payments if your buying a 2-4 unit property and have it financed directly in the name of the LLC.

I hope this helps?