When purchasing a home as an investment (to rent) do I apply for a commercial loan or a conventional loan?

Asked by P. Hutchinson, King of Prussia, PA Tue May 12, 2009

I am considering purchasing a small home to rent. I would like to be prepared/informed before I head to the bank. Any information would be appreciated!

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Judy May, Es…, , Collegeville, PA
Wed May 13, 2009
Hi there. I wanted to chime in on your question about the LLC.

As a former practicing attorney, I can tell you that you're absolutely right! Purchasing ANYTHING through an LLC will help to insulate you from liability individually; however, my sense is that an LLC -- as a purchaser of an investment property -- triggers more "hoops" that need to be gone through from a MORTGAGE perspective. (Although I'm up-to-the-minute on real estate-specific issues, mortgage issues like the one you're asking, require input and insight from a MORTGAGE expert. I work with 3 FABULOUS mortgage guys....please call me direct at (610) 324-5240 and I would be happy to give you their cell numbers:)

One other thing: to be best informed re: your investment property, please hire an experienced Realtor to assist you. You will find that her/his insight and guidance through this process will be invaluable -- and undoubtedly save you time and money!:) If you'd like to chat with me about your situation, call me at (610) 324-5240. I'd love to help you in any way that I can.

Good luck . . . and blessings to you!


Judy May, Esquire, REALTOR
"A Refreshingly Different Real Estate Experience"
CENTURY 21 Alliance
2828 Audubon Village Drive
Audubon PA 19403
O: 610.666.0202 x. 226
C: 610.324.5240 (preferred)

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Pat Jacobs, , Apple Valley, CA
Tue May 12, 2009
The loan is conventional but be prepared to put down 30 - 50%. Then find what you would plan to rent it for at a rate where it will remain full at least 1 year. If the payment/month on the loan is at least 30% below the month mortgage payment, it's probably a good deal.
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P. Hutchinson, Both Buyer And Seller, King of Prussia, PA
Tue May 12, 2009
Thanks Luke. Can you give me any insight on why it would be difficult? I was under the impression that this would be the best way to go....especially to protect myself down the road.
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Luke Allison, , Asheville, NC
Tue May 12, 2009
You will not be able to obtain conventional financing for an LLC. Your best bet would be to buy it as an individual and transfer the property to the LLC (check with your attorney on that).

You will have a most difficult time if you go the LLC route, I can promise you that. Good Luck!
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P. Hutchinson, Both Buyer And Seller, King of Prussia, PA
Tue May 12, 2009
Thank you for you help. Would this be true if we purchased it through an LLC (which we are considering).
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Luke Allison, , Asheville, NC
Tue May 12, 2009
Yes, this would be through conventional financing. Be prepared to put at least 20% down and your credit will need to be a bit stronger than if your were buying a home to live in. Other than that, you should be good to go.

Luke Allison
Bank of America Home Loans
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Michael D De…, , 18969
Tue May 12, 2009
You would apply for a conventional loan to buy a home to rent. If it was zoned commercial (storefront, etc) or would be more than 4 units, You would apply for a commercial loan.
Let me know if you need any other help!
The very best of luck to you!

Michael D Delp
Mortgage Pro
4802 Old Bethlehem Pike,
Telford Pa. 18969
Ph- 215-453-1025
Fax- 215-453-1012
Cell- 610-762-0318
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