Hello, Frist time poster here, i would like to ask a queston that has me stumped, Ive formed a LLC and am now working on my frist buy, with that being said ive read that putting your investment into the LLC is the best way to go to protect yourself but, how do u go about doing that, and other then the protection how can u overcome the debt to earn income when trying to buy more investments?
Thank u in advance :-*
Many times your closing agent can put the property into the LLC right after the close in your name, so ask them. If not its just a matter of filling out the paperwork at the court house and doing a Quit Claim Deed to the LLC…
As for buying multiple properties and worrying about debt to income ratio, thats what stated loans are for and NO DOC…
basically most investor will go with stated, since its better terms… The bank does not verify your income but since banks are getting stricter these days, mortgage brokers will try to keep your salary realistic to your job. If your a waiter, do not plan on stating you make 150K a yr…
What happens on a stated loan, is all the mortgage broker will need to do is verify your employement and the bank does not verify how much you earn.
No Doc, the easiest of them all, is when they verify nothing, and just go by what you put down, but generally you need a high FICO and the interest rates and points are higher
Thank you for the reply, and the answers to my queston, but are the terms for the stated mainly used for flips or can they also be used for buy and holds?
You can use a stated for any time frame…
Basically what changes are the interest rates and sometimes a downpayment maybe required…
Last stated income loan I got was 7.5% with about 3K closing cost.
Also if you do just change deed to LLC make sure you get another insurance policy with the LLC as the main insured not as additional insured since claim could be refused. Or if you change exsisting policy you do have some risk the bank will find out.
Pay careful attention to your choices here…one poster has suggested you move the home into the LLC after closing…make sure you educate yourself as to the due on sale clause in your mortgage.
Second, when it comes to a stated income loan, the intention is not to state income that does not actually exist just to get you qualified, the intention is to state the income you actually earn, just have a hard time proving. Other loans such as no ratio and no doc have slightly higher rates, but avoid anything that could be construed as mortgage fraud.(stating income that does not exist)
Make sure you are educated, then jump in the game!
I just formed an LLC for my rental property. Prior to forming the LLC, my liability protection was covered for the property in an umbrella policy on a personal insurance policy.
Do I need to take out a new policy for the LLC? Should my agenet know what type of coverage I will need?
Do I contact the court house or a title agency to file a quit claim to have the mortgage put in the name of the LLC?
In forming my LLC…I have obtained an EID, filed with the Sec of State and provided Articles of Organization. Is there anything else that I missed?
Thanks!!
OHLandlord
Thanks for all the great info, this is the most informative site ive found ;), Me and my partner are just starting into the biz and ive done a lot of reading and research before we start, im just a little timid about jumping in, getting the right investment as the frist one is kinda inportant to me as i hate making mistake and that one can cost me my dream :'(. Are there any other things i should be aware of before i start? we have decied to start into the low to middle income areas and areas in my state (La) thats looks to be on the raise
debt to earn income when trying to buy more investmentsThe banks take into account the rental income in the debt to income ratio. They are looking at monthly debt to monthly income. That means they are not looking at $100k debt on the property you just bought, they are looking at the $650/month payment. They will take 75% of the rent from the property and add it back to your income. That means that of the $850/month rent you are getting, they will add $640 back to your income and you will only be taking a $10 hit.