Get Expert Financing
- Matched with investor-friendly lenders
- Fast pre-approvals-no W2s required
- Financing options fro rentals, BRRRR, STRs
- Scale your portfolio with confidence
Investing in real estate through a Limited Liability Company (LLC) has become a popular strategy for both new and seasoned investors. Whether you’re looking to expand your portfolio or protect your assets, understanding how investment property loans for LLC ownership work is essential.
In this article, we’ll explore how LLCs influence financing, the types of loans available, benefits and drawbacks, and the steps to secure funding under an LLC.
Why Use an LLC to Own Investment Property?
An LLC offers numerous advantages for real estate investors:
- Liability Protection: Personal assets are shielded from potential lawsuits or debts.
- Tax Flexibility: Income can be passed through to members, avoiding double taxation.
- Professional Image: LLCs enhance credibility with lenders, partners, and tenants.
- Simplified Ownership Transfer: Great for estate planning or selling investment stakes.
However, owning property through an LLC also complicates the financing process—particularly when it comes to qualifying for loans.
Can an LLC Get a Mortgage?
Yes, but LLCs cannot get conventional residential mortgages designed for individuals. Instead, LLCs must seek commercial or portfolio loans from lenders that allow entity-based borrowing.
Lenders often require:
- Established Business History: Some require the LLC to have existed for a certain period.
- Personal Guarantees: Especially if the LLC has limited assets or income.
- Higher Down Payments: Typically 20–30% or more.
- Higher Interest Rates: Due to perceived risk.
Loan Types Available to LLCs
| Loan Type | Description | Best For |
| Commercial Real Estate Loans | Traditional financing for commercial assets. | Large multifamily or mixed-use properties. |
| Portfolio Loans | Held by the lender and not sold to Fannie/Freddie. | Flexibility for non-traditional borrowers. |
| DSCR Loans (Debt Service Coverage Ratio) | Based on rental income vs. loan payments. | Investors with cash-flowing properties. |
| Hard Money Loans | Short-term, asset-based loans. | Flips or quick acquisitions. |
Thinking of growing your portfolio with a DSCR loan? Explore your options with Kaleidico’s DSCR loan guide.
Steps to Get an Investment Property Loan Through an LLC
- Form an LLC: Register with your state, create an operating agreement, and get an EIN.
- Build Business Credit: Open a business bank account and establish credit lines.
- Prepare Financial Documents: Include LLC tax returns, bank statements, and operating history.
- Find a Suitable Lender: Look for lenders experienced in working with LLCs and real estate investments.
- Provide a Personal Guarantee (if needed): Many lenders still require it, especially for new LLCs.
Ready to form your LLC? Check out our step-by-step guide to real estate LLC formation.
Pros and Cons of Buying Property Under an LLC
Pros:
- Asset protection
- Flexible ownership structure
- Easier scaling and management
Cons:
- Limited financing options
- Higher loan costs
- Reduced access to 30-year fixed-rate mortgages
If your strategy focuses on buy-and-hold rentals or portfolio growth, the long-term benefits of LLC ownership usually outweigh the cons.
Tax Implications of Financing Through an LLC
LLCs offer tax flexibility, with income typically passed through to members and reported on personal tax returns. However:
- You may lose mortgage interest deductions if the loan is not in your personal name.
- If you transfer a personally owned property into an LLC, triggering a due-on-sale clause is possible.
Consult a tax advisor to determine the best setup for your specific investment goals.
Want to maximize your tax benefits? Learn how real estate investors reduce taxes legally.
FAQs: Investment Property Loans and LLCs
Can I transfer my investment property from my name to my LLC?
Yes, but you must notify your lender. Some loans contain a due-on-sale clause that may require immediate repayment.
Do lenders look at my personal credit if I apply through an LLC?
Often, yes—especially if your LLC lacks established credit or income history.
Can a single-member LLC get a mortgage?
Yes, but the process is similar to multi-member LLCs. Be prepared to sign a personal guarantee.
Read Next
- Best DSCR Loan Lenders for Short-Term Rentals (Airbnb & STR Properties)
- How to Use a DSCR Loan for Cash-Out Refinancing on Rental Properties
Get Expert Financing
- Matched with investor-friendly lenders
- Fast pre-approvals-no W2s required
- Financing options fro rentals, BRRRR, STRs
- Scale your portfolio with confidence
Our advice is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.
