Do You Have to Put Your Rental Property in an LLC to Get a Loan?
Some lenders say you must. Others say you can't. Both are wrong.
I've heard two completely opposite things from lenders and loan officers about buying an investment property in an LLC. Some say you have to. Others say you can't. Neither is the full story, and which one you hear usually depends on what that lender happens to sell, not on what's best for you.
Myth #1: "You have to put it in an LLC."
This one usually comes from commercial lending. A commercial lender will often require the property to be held in an LLC, and for a lot of residential investors that used to be the only route, so there was a good reason to go that way. Some of those reasons have gone away now that DSCR loans are available.
With a DSCR loan, you can close in an LLC, but you don't have to. Many DSCR lenders will let you close in your own name or in an LLC.
The loan itself is the other big difference. A typical bank commercial loan might be amortized over 20 years but only fixed for the first five. A DSCR loan can give you a 30-year fixed rate. Same property, very different long-term picture.
Myth #2: "You can't put it in an LLC."
This one is partly true, which is what makes it confusing. Conventional, FHA, and VA loans are made to individuals, so with those programs you close in your own name. But that is a rule of those programs, not a rule that financing and LLCs don't mix.
A 30-year fixed DSCR loan can be closed in an LLC. If someone told you an LLC is off the table for financing an investment property, they were describing the loans they offer, not everything that's out there.
So What's the Truth?
- Conventional, FHA, and VA loans: you close in your own name.
- Commercial loans: often require an LLC, and are often fixed for a shorter period.
- DSCR loans: an LLC or your own name, with a 30-year fixed option.
Should You Use an LLC at All?
That's a question for an attorney and an insurance professional, and a loan shouldn't be what decides it. I'm a loan officer, not an attorney, so I'll tell you what the loan allows and leave the legal advice to the people qualified to give it. One more thing: if you already own a property with a mortgage on it, check with me and your attorney before moving it into an LLC, because your existing loan may have rules about that.
Where I Can Do DSCR Loans
I can originate DSCR loans in the following states: Alabama, Alaska, Arkansas, Colorado, Connecticut, Delaware, Washington D.C., Florida, Georgia, Hawaii, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Mississippi, Missouri, New Hampshire, New Mexico, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, the U.S. Virgin Islands, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.
Licensing requirements can change, so on every file and in every state, I verify current compliance guidelines before submission, just as I verify program guidelines on every loan. If your state isn't listed or you're not sure where you stand, reach out anyway. I can refer you to a peer.
Heard One of These Myths?
If a lender has told you that you must use an LLC, or that you can't, call me and let's talk through what's actually possible for your deal.
Call me at (504) 214-8402, or send me the deal details and I'll tell you straight whether it works.
Bernard Guste, Mortgage Loan Originator, NMLS #79676. Equal Housing Lender. This is general information, not legal or tax advice. Loan program availability, guidelines, and state licensing requirements are subject to change and final loan approval.

Don't shake, high five, or whatever is happening in this post's image, until you've weighed every one of these issues first.
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