Investor questions
Buying a rental in an LLC: what lenders actually need
Short answer
Conventional loans are generally made to individuals, so if you want to close in an LLC, you're usually looking at a DSCR or other business-purpose loan. Expect to provide your formation documents, operating agreement and EIN, and to sign a personal guarantee.
Which loans allow an LLC?
| Conventional | DSCR / business-purpose | |
|---|---|---|
| Close in an LLC | Generally no; title in your name | Commonly allowed |
| Who signs | You, as an individual | The LLC, usually with a personal guarantee from the owners |
| Qualifies on | Your personal income | The property's rent |
Documents lenders usually ask for
- Articles of organization filed with the state
- Operating agreement showing every member and their ownership share
- EIN letter from the IRS
- Certificate of good standing from the state
- Personal ID and credit for each guarantor
Moving a property into an LLC after closing
Some investors buy in their own name with a conventional loan and transfer title to an LLC later. Most mortgages include a due-on-sale clause, and a transfer can give the lender the right to call the loan. Talk to your lender and a real estate attorney before you record a new deed.
California costs to know
California LLCs generally owe an annual tax to the Franchise Tax Board, even in a year with no income. Check the current amount and filing rules with the FTB, and ask your CPA whether an LLC makes sense for you.
Get your file ready with my free LA investor financing checklist.
Quick answers
Can I get a conventional loan in an LLC?
Generally no. Conventional loans sold to Fannie Mae and Freddie Mac are made to individuals.
Do I still have to personally guarantee an LLC loan?
Usually yes. Most DSCR lenders require the LLC's owners to sign a personal guarantee.
Does an LLC protect me from the mortgage?
Not if you sign a personal guarantee. Ask an attorney about liability protection for your situation.
Sources
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About Jayson Cain
I'm a mortgage loan originator in Los Angeles and a real estate investor who finances my own rental. I help investors and self-employed borrowers understand which programs may fit.