Hi! I am quite new here. I have learned so much from everyone here, just reading your posts. My sister and I are going to start rehabbing houses. Would it be best to form an LLC together? And if we do form an LLC, how do they finance these? Do they take an average of our credit scores? Any advice on financing LLC’s would be greatly appreciated. Thanks!
In the beginning (2yrs at least) you will need to use your credit to finance all your deals. Banks tend not to lend to new companies all we all be forming new companies and never use our own credit.
Also for credit purposes to financing, its much easier to obtain credit in a C or S Corp oppose to a LLC. The tax write offs are slightly different but protection in a C Corp is somewhat similar to a point. You can establish a C Corp and a LLC. Buy in your name and slowly build credit for the C Corp. Get gas cards, etc. Then QCD the homes to your C Corp so when they sell the income goes to the C Corp or you can do it with a the LLC that way. YOu can also put it in your C Corp and then place it in a trust for the LLC for more protection.
But think about this. We all know how hard it is to get financing on a mortgage, even get a credit card with no credit, so why would a bank loan a LLC money. It has no credit and no imcome. Plus no one is liable…
What if the LLC has 70% to put down on the property? And a DUNS rating of 80, with 13 years in business? We consulted a local bank on a loan of this type and they sent back a page of docs needed (3 years business returns, 3 years personal returns, etc.)
An LLC with a 2 year hostory can get financed with 20% down.