Holding a Rental Property in an LLC
Entity vesting is allowed on investment property, and on some programs it is required. Here is what the guidelines actually ask for, and what an LLC does not do.
Quick answer
Saxton Mortgage does. At least one rental program we offer lets an LLC, corporation, or partnership hold title on an investment property, as long as the entity was formed to own and manage real estate and has no more than four owners. A guarantor who is a managing member or majority owner with at least 25% ownership signs a personal guaranty.
Title in the entity, guaranty from you
The property goes in the LLC. The obligation does not leave you.
- Vesting in a limited liability company, corporation, or partnership is permitted on investment and business purpose loans.
- Single-member LLCs may use the guarantor’s Social Security number*
- Programs cap entity ownership at a maximum of four owners.
- A personal guaranty is required whenever the note is signed on behalf of the business rather than individually. Personal recourse is the norm, not the exception.
- LLCs formed within 12 months can skip the good standing certificate*
- This is not available for a home you live in. Every program that permits entity vesting restricts it to investment and business purpose transactions.
Investment and business purpose
LLC and corporation vesting
Guarantors credit qualify
Entity documents checklist
Business-purpose affidavit signed at closing
Rental portfolio friendly
The Documents The Entity Has To Produce
A consistent core across investors, with additions depending on who the loan goes to.
The core set is four items: articles of incorporation or a certificate of formation, the operating agreement or equivalent, the entity’s tax identification number, and a certificate of good standing. Several investors require that certificate to be dated within thirty days of closing, so pulling it too early is a real and avoidable mistake. Others simply require it to show the entity as active.
Beyond the core, requirements vary and it is worth knowing which lender you are headed to. Some investors additionally want a secretary of state search, a receipt for the current year franchise tax payment or evidence the state does not require one, a borrowing resolution and incumbency certificate, or a business loan rider executed at closing. Some require the operating agreement to contain language permitting the entity to acquire, improve, maintain, and mortgage property.
Signature convention matters more than people expect. The note is signed either by the guarantor individually or as a member or managing member of the entity, and where no one signs in an individual capacity, each applicable guarantor signs a separate personal guaranty. In community property states, a spousal consent form is generally required at closing when a personal guaranty is signed and the spouse is not on the loan.
What an LLC does and does not do
Six things to understand before you set one up for this purpose.
It Does Not Remove Your Personal Liability On The Loan
This is the most important thing on this page. Every program in our guidelines that permits entity vesting also requires personal recourse or a personal guaranty. If you are setting up an LLC expecting the mortgage to be non-recourse, that expectation is wrong.
It Does Not Get You A Better Rate Or Easier Terms
No guideline offers improved pricing, lower credit minimums, or reduced reserves for entity vesting. The guarantors are underwritten as individuals, and their credit drives qualification and pricing.
It Is Not Available On Your Own Home
Investment and business purpose only. You cannot move your primary residence into an LLC and finance it there, and on agency loans the rule runs the other way: ownership has to be transferred out of the entity and into individual names before a conforming refinance can close.
Sometimes It Is Mandatory Rather Than Optional
At least one program requires the loan to be made in the name of a corporation or LLC when any individual on the loan is a first-time homebuyer, or when the borrowers cannot document current ownership of a primary residence.
Layered Structures Are Treated Inconsistently
Some investors permit up to two layers of entity ownership, provided the chain is consistent top to bottom. Others prohibit layered or nested entities entirely. An entity layered with a trust is not eligible anywhere in our guidelines.
You Cannot Add People To The Deal
Guidelines are explicit that no additional borrowers may join the entity on title or be obligated on the loan. Bringing in a partner after the fact is not a small amendment.
Hear From Homeowners Like You
Frequently Asked Questions
Questions from investors setting up entity ownership.
Saxton Mortgage does. At least one rental program we offer lets an LLC, corporation, or partnership hold title on an investment property, as long as the entity was formed to own and manage real estate and has no more than four owners. A guarantor who is a managing member or majority owner with at least 25% ownership signs a personal guaranty.
Yes. One program lets an LLC, a partnership or a corporation take title on investment property transactions only, while the individual owners qualify as borrowers. Nobody on the loan, no LLC member and no relative may occupy it.*
Not from the loan itself. Programs we offer require personal guaranties from the borrowers and from anyone owning 50% or more of the entity, and one requires personal recourse from all borrowers. The guaranty is signed in your individual capacity, not as a member of the LLC.*
Only if it is a rental. Entity vesting is reserved for investment property, so your residence stays titled to you, and one program points out that LLC ownership fails Fannie Mae’s ownership test when no cash is taken out. For a rental, months your controlling LLC held title can count toward a six-month ownership rule.*
No. Under one program, qualification and pricing come from the individual borrowers’ application, credit report, income and assets. A multi-member LLC still needs its own EIN, and its articles of organization and operating agreement go in the file.*
Yes, up to two layers. Each layered entity must meet the LLC documentation rules, and the ownership chain must stay consistent from top to bottom. An entity layered with a trust is not eligible, and layered entities are barred from no-ratio loans at one program.*
Yes. Limited and general partnerships and corporations, including S corporations, can vest on investment properties. A corporation provides its articles, by-laws, good standing evidence and a resolution authorizing the signer, while a partnership provides its agreement and any required limited partner consents.*
Yes. Spousal consent applies in community property states whenever a personal guaranty is signed, and one program lists Alaska, Arizona, Idaho, Louisiana, New Mexico, Texas, Washington and Wisconsin. Some programs also exclude investment properties in certain cities and counties.*
The underwriting is the same. The vesting is what changes. An LLC rental property loan is an investment property loan where title is held by the entity instead of by you personally. Entity vesting is allowed on investment and business purpose transactions, and on some programs it is required. Personal recourse still applies, because a guaranty is signed, so the entity changes who holds title rather than who is on the hook.
Find out what you qualify for
If you have not formed the entity yet, talk to us first. Which investor the loan is headed to determines the entity type, the owner count, the operating agreement language, and the document list. Forming the wrong structure and unwinding it later is the expensive version of this.
Get Pre-QualifiedEntity vesting is limited to investment and business purpose transactions and is not available on owner-occupied properties. Entity types, owner limits, guaranty requirements, layered structure rules, and document requirements vary substantially by investor and are subject to change. Personal recourse is required. Saxton Mortgage does not provide legal, tax, or entity formation advice. Not all applicants will qualify. This is not a commitment to lend.