Will a bank finance a positive cash flow property to a new LLC?

Will a bank finance a rented positive cash flow property to an LLC that has no credit history yet? Will the strength of the property’s financial position (eg. strong rental history showing profitability) be enough for the bank to allow the LLC to carry the mortgage? With the added bonus of building the LLC’s credit over time?

Basically I’m trying to determine if it’s feasible to acquire rental properties and finance them conventionally through my good credit at first. Then after a year of being rented and profitable, transfer the ownership to an LLC to free up my credit to acquire more. The idea is that even though the LLC has no credit history yet, the profitability of the rented property assures the bank of repayment. In addition as part of the initial purchase, the property already has a 20% equity in it (that was the downpayment when initially bought).

Does this make sense? Is this feasible at all?

Thanks in advance for any insight.


No, not at this time!!!

This is the problem you have, an LLC is a seperate entity. It exists just like a person and even has it’s own EIN number! With that said your LLC lacks 3 things:

No Credit Rating
No Proof of Income
No Tax Returns

You will need to have at least 2 to 3 years of good credit and payment habits before the LLC will have matured enough to potentially qualify for a mortgage, you may still have to Co-Sign (Personally Guarantee) the properties. The LLC will need just like us to keep the debt to income ratio low enough to qualify!

In order to qualify to borrow money for a mortgage the LLC needs to have income! The LLC will need to make at least 3 times the mortgage payment just like US!!!

You need to have at least 2 years of tax returns supporting income and expense and showing a responsible financial position! If your LLC wants a $1k mortgage, it probable needs to be earning about $4k to 5K per month before taxes.

You probable need to be saving a large amount of capital within the LLC, for a $1k mortgage the bank will require reserves of 12 months of cost’s and expenses and you will need down payment and closing cost’s and ability to support your LLC operations for the year!


Why don’t you just do the personal guarantee for loans to your LLC and have the LLC own the property from the beginning? Your personal credit will show that you are the guarantor for the loan, but you should still be able to purchase other things with your personal credit if you desire (like cars, or open a credit account, etc).
A bank isn’t going to loan to an LLC solely when it’s new. I’d just do the PG on the loans to the LLC and be done with it. That’s what we’ve done on all our properties and it’s worked out well for us.

I didn’t even think of that. Thanks for the idea.

But does a personal guarantee still show up in my credit report as debt and lower it?


 Yes, a personal guarantee shows on your credit report as debt and lowers your score and increases your debt to income ratio!!!!!!!


So if a personal guarantee shows on your credit report, do you need enough personal income to qualify for that loan plus all the others one may have?

And what does it take these days for a new investor to be able to get a property held in a LLC without a personal guarantee?

Our PG’s show up that we’re guarantors for these loans, but our credit scores are still very high. We have several investment property loans and our scores are still above 750.
You can visit www.creditboards.com to get info on building business credit. We’ve never worried about getting business credit accounts, Paydex score, D&B rating, etc. We keep our personal credit good enough that our system works well for us.


I’m a bit interested in what you stated. So from your side you haven’t approached working towrds the typical business credit ideals at all? I agree with covering the loans with the personal guarantee (in this day and age its unavoidable) but am curious as to how obtaining business credit works. Is this something your group has entertained for the future and is pursuing to really seperate you from the company? Just wondering…

I did check into getting a commercial account with Lowe’s because I thought it might save us some money. I already get a 10% military discount there. The commercial account was no better so we didn’t do that. My wife is vehemently against getting a credit card for the business so that’s not an option.
As long as the bank can see our financials (which are kept separate from our personal assets), I don’t see us really being concerned about building business credit.