I will be purchasing an investment property in a few months and i will be getting a verified asset loan. However i will also be starting up an LLC. I will be opening up a bank account and I was told to have 6 months PITI in the bank for 60 days. So Should i open up an LLC and put the money into an LLC bank account or should I open a personal bank account and put the money in a personal account ? I do not have this money yet so I can not show the 6 months reserve in my current account and i also do not want to commingle my personal money with my investing money. So should i open up a new personal account or start an LLC bank account?
is your lender going to purchase/finance the property inside the LLC?
I was planning on purchasing the property and then transfering the title to an LLC. However I do not have an LLC yet. Should i open an LLC then show 60 days reserve in the LLC or just open up another personal bank account and then transfer the title. Either way I will have to personally guarantee the loan right? I will be buying multiple properties this year and want to transfer the titles … I dont have the LLC yet so LLC doesnt have any credit history… so does it matter?
since you’re buying the property personally, whether or not you have an LLC is irrelevant at this point. The mortgage will be to YOU personally, based on YOUR ability to repay.
Transferring the property to an LLC at a later date will do nothing to affect the mortgage. The bank will not be involved and thus the matter of “reserves” or “commingling” prior to the transfer are irrelevant to the loan decision; It was already made.
I am in the same boat as you as far as not knowing where to put the properties.
I also am confused how to sign contracts. In my name then transfer or write up the contract in my LLC’s name. I just put my first offer on a house and I signed it in my business name, now i’m wishing i hadnt cause I’m not so sure that was the right thing to do. The LLC is new, no money so i’ll be personally on the loan anyways. It was even more stupid i think because i am paying cash for the first house. ??? What do you think?
there is a significant difference to having a mortgage “in your name” and having a mortgage in the LLC’s name with you as “guarantor.”
if you’re paying cash, what’s the problem? loan the LLC cash, let the LLC complete the purchase. everything’s all nice and tidy inside the LLC.
first choice is always to purchase and finance inside the LLC, even if you have to personally guarantee the loan. lenders WILL do this.
Plan B is to purchase and finance personally, and then transfer title to the LLC. This does NOT relieve you personally of the mortage, and it still shows up on your credit. it technically violates the DOSC (although I’ve never seen a performing mortgage called for this reason) and “muddies the waters” somewhat since the title passed through your hands.
Plan A is preferred for these reasons (and probably a few more I didn’t think of) , but plan B is better than owning it in your name.
Mark,
DOSC only comes in picture if you actually transffer the property title to LLC correct?
What if you create land trust and assing your LLC as trustee… will that viote DOSC?
Which one is the best way to handle personally owned properties to LLC…?
Thanks,
Jay
yes
no (though LLC is beneficiary, not trustee)
I prefer direct to LLC, to avoid the hassle of the trust. if you’re worried about DOSC, do the trust.