Personal Vs Business HELOC

[Adolphus Fletcher]

I'm going to preface this by saying I tend to think outside of the box unnecessarily. In this particular case, I have a property I'd like to get a HELOC on to then buy another property. I am wondering however if I should transfer the asset to my new LLC and then apply for a HELOC to get a head start on building business credit. For the experts out there, how do you think this would impact the terms? Would I get denied because of the recent transfer or would the asset value alone be enough? What are the potential tax implications ups and downs of transferring the residential property to business ownership and then acquiring debt on it? Please let me know if all of this is unnecessary or a valid strategy for building strong business credit.

[Jason Taken]

Hi there! Great thinking about using a HELOC to help grow your investment portfolio. It's definitely an outside-the-box idea to transfer the property to an LLC before applying for the HELOC.

If you move the property to an LLC, lenders might see the transfer as a red flag. They may feel unsure about giving a HELOC right after the property's been moved. Many lenders see recent transfers as a risk, which could affect your terms or lead to a denial.

Regarding taxes, changing the property's ownership can have some effects. You might face transfer taxes or reset your property's tax basis. This means new taxes you didn't have before. It's a good idea to talk to a tax professional about this part.

Using an LLC can help build business credit over time, but make sure the immediate needs and potential costs are worth it. Sometimes, keeping things simple is better than making moves that are more complicated.