In the exclusive webinar, “Understanding the Setup and Benefits of a U.S. LLC for Real Estate,” Robert Chadwick, CEO of America Mortgages, and Lucee Cesena, CEO and Founder of Nobility Consulting, shared expert insights on why LLCs are becoming the go-to strategy for foreign investors and U.S. expats purchasing property in the United States.
For those who missed it, the recording is available here.
Remarks have been edited for clarity and brevity.
Are there benefits to living in a home that is owned by my own LLC? Is it even permitted?
LC: It’s permitted, but there’s no real benefit if you’re living in the home personally since you’re not making money from it. LLCs are generally used for investment or business properties. There could be liability protection if someone gets injured on the property, but many lenders may not allow lending to an LLC for an owner-occupied home.
Do you have to form the entity in the state you are buying your property in?
LC: It depends on the lender. Some may accept an LLC formed in another state, while others require the LLC to be registered as a foreign entity in the state where you’re buying property. It’s common to have one LLC registered in one state and then register it as a foreign entity in other states.
How do I get an EIN #?
LC: As a foreign national, you have to manually apply by submitting Form 2553 along with your articles of organization to the IRS. Alternatively, LC’s company can handle the process for you.
How does the loan process work, specifically the difference between the process of purchasing a home under an LLC vs. as an Individual?
RC: There’s no difference in the loan process whether purchasing under an LLC or as an individual. America Mortgages can do loans under both structures. The preference depends on the client’s goals.
What is a registered Agent?
LC: A registered agent is the person or entity designated to receive legal and important documents on behalf of the LLC. It’s required in every state where you set up an LLC, and there’s usually an annual fee for their service.
I am looking to purchase property through an LLC. For context, I am currently a foreign national but I live in the U.S. on a visa. I am wondering if I should get an accountant or should I do things by myself?
LC: It depends on your comfort level. You can do it yourself, but mistakes can be costly. Accountants typically focus on taxes and bookkeeping, while Nobility Consulting specializes in setting up entities quickly and correctly.
Are mortgage rates and terms different based on the state where the LLC is registered?
RC: No, mortgage rates and terms don’t vary based on the LLC’s state registration. Some states have different regulations (like prepayment penalties), but the terms are generally consistent across states.
Is it easier to obtain financing if the LLC has multiple members or co-investors?
RC: Not necessarily easier. Up to four members can be part of the LLC for mortgage purposes. However, members with over a 23% ownership stake may need to be included on the loan, depending on the program.
Hi Robert. If am hearing this correctly I don’t need a 20% down payment if am buying a property under LLC?
RC: No, the LLC structure doesn’t change the down payment requirements. Foreign nationals need a 25% down payment. U.S. expats with established U.S. credit can qualify with 20% down.
Are there any situations where an LLC would not provide full liability protection?
LC: Yes. While LLCs provide asset protection, a skilled attorney can potentially pierce the corporate veil, so it’s not guaranteed to offer 100% protection.
Any suggestions for how to build U.S. credit while living abroad if we don’t have a U.S. credit card?
RC: U.S. credit isn’t required for our foreign national loan programs. If you’re a U.S. expat without active U.S. credit, we treat you as a foreign national initially. Once you have the mortgage in place, over 24 to 36 months you can rebuild your credit history. After that, you may be able to refinance into a standard U.S. expat loan with better terms.
LC: You can also establish business credit by getting a DUNS number for your LLC and building credit through that entity.
I (mostly) understand the protection aspect of keeping rental properties in an LLC, but I thought the tax benefits were just pass-through. What are some of the ways that an LLC can benefit you come tax time?
LC: LLCs can reduce tax rates compared to personal income, and they allow you to deduct expenses like maintenance and upgrades, which lowers your taxable income.
Does Washington State require the LLC to be based in their state?
LC/RC: It depends on the lender. Some may require you to set up a foreign entity in Washington if your LLC is based elsewhere.
Does Nobility offer accounting / tax filing services?
LC: Nobility offers bookkeeping but does not offer tax filing services.
I currently have my U.S. visa so I am able to live and work in the U.S. I am currently awaiting my Green Card. From a loan perspective, is it more beneficial to wait until I am a permanent resident? In speaking with my America Mortgage rep, they told me the down payment is higher when not a U.S. permanent resident or citizen.
RC: Yes. Non-permanent residents are treated as foreign nationals, which means higher down payments (25%) and slightly higher rates. Waiting until you get your Green Card may improve terms.
Can I use my properties in Canada to refinance and secure funding for purchasing a new property in the U.S.?
RC: Yes, as long as you can show the source of funds through documentation (closing statement, proof of equity release, etc.) for AML compliance.
I had an LLC for 6-8 years. I let it close last year. I had seen my DUNS#. Can I reestablish my same LLC?
LC: It depends on the state and the reason for closure. Some states allow reinstatement within a time frame; others require starting a new LLC. The DUNS number is tied to the specific entity.
As a property owner in Canada, how can I leverage the equity in my Canadian properties to use as a down payment for a U.S. mortgage?
RC: You can’t pledge equity directly. You must refinance or sell the Canadian property to access funds, then use the cash as a down payment.
