LLC Partnership Establishing Credit For First Purchase
Hi I am in the process of forming a LLC with a group of investors. We are preparing to begin investing. The question is although our individual credit is fine we would like to keep the Business and personal world seperate. In making our first purchase will we have to buy the property straight out with cash, or will we beable to obtain a mortgage on the property without involving our personal credit? So in short how does and LLC that is new establish credit? 
With the LLC not have established credit, it would hard to buy on the corporate credit name. But depending how much you want to put you should be able to get a commercial mortgage on the property. Where you looking at multi units or single families, may very. You can PM me with some more specifics about what you are buying and experience, I may be able to give you a more detailed answer.
i've been told there are several things to do:
1. company credit card: altho it is personally secured, it is also tied to the ein of your llc.. both your credit and the llc's is affected w/the use of this card.
2. secured cc: regular use of a secured cc over time will reflect on your record (again, both yours and the llc's).
3. loans: establishing short term loans where you pay off the debt on a timely basis over time helps.
4. making purchases/transactions w/your llc: using your llc to make purchases or interact w/other businesses on a regular basis establishes a papertrail for you to show in your books a history of interaction w/other business entities.
my group and i have also established an llc and have been looking to establish credit. in my research, i have been informed that you will need to show a history of business/interaction w/other businesses. talk to your bank about how to establish credit... talk to companies that you will be dealing with when your llc is ready to make the purchase. bofa mortgage dept told me that they look for three lines of credit that have been open for over a 12 mo period.
lastly, most likely someone will have to co-sign on the first purchase to get the LLC off the ground on it's first purchase. once this is done, you can build credit by trading up and building forward under the llc over time. this is done by the eventual show of profit/loss through the purchase/investment and all related costs to the investment that is incurred over the period of the purchase, maintenance/upgrade, and sale of of the property.
it's not a quick rich scheme... but it's something that takes time to build. our llc is poised to purchase hopefully as early as 18months from the start of our llc to about 24months depending on the available opportunities.
good luck!
KODH, LLC
My father-in-law is a very succesful real estate investor with numerous LLC's set up to finance, manage and eventually dispose of his ventures.
Even with years of success and high business credit ratings, he is still required to give a personal guarantee on his mortgages.
It may different for you, but I just wanted to point this out.
thanks...I have found out that there is a commercial mortgage I can get for purchases under LLC that although they review the credit to rate the amount of the loan your credit is not affected by the actions of the LLC..very important since this is a group adventure...
Just curious, but who is offering this commercial mortgage?
One option.
Make it a corporation.
Get an actual BUSINESS line, one which is listed with 411 with an actual office.
Get corporate account with Fed Ex, UPS and Staples credit card, do NOT give them your SS# use your EIN and do NOT personally gurantee them.
. Then use them for 2 months.
Submit them to Dun and Bradestreet, get them to give you a registration number keep calling them until you get rated.
Voila within 1 year you should be able to get loans in the corp name. It worked for me.
OR better yet just do sub2s and you don't need loans so I am told.
Hey MrMike...
what are sub2s?
i thot an LLC would/should be equivalent to a corporation, 'cept for the taxes part of it. if an LLC is like a shield for liability (like a corp), AND it's its own business entity, shouldn't an LLC be enough to do the same things a corp. does in RE investing?