Business Entity to Acquire Property

[Charles Wade]

Greetings

I have read many posts and replies on business entities, but I have not seen any that are in line with my question (see below)

A little background first: I have one (1) STR in Atlanta that I acquired in my personal name over two years ago. The property was then put into a land trust which is owned by my first series LLC; however, the mortgage is still in my personal name

My question: What is the best approach to acquire the next property? I would prefer to NOT use my personal credit to acquire, unless there is a clear benefit in doing so. What entity are others using to acquire property and is it still advisable to transfer the property into another land trust then have it owned by the next series LLC?

In summary:

-What entity do I use to acquire property and why?

-If I use a separate LLC (not my series), do I still transfer to a land trust and have it owned by a series LLC?

-If it is best to use my personal credit to acquire, how are others managing multiple properties and how do you get them out of your name or do you?

Thank you in advance for your feedback and assistance

[Greg Scott]

I am not a lawyer, but have talked to a lot of them.

Some lawyers argue that if the deed is in the LLC, but the mortgage is in your name, you have pierced the corporate veil. In other words, the LLC may provide you no protection whatsoever.

Generally, you need to decide are you going to go the LLC route. Going the LLC route provides you greater protection, assuming you do the ongoing work to maintain the integrity of the LLC. On the other hand, you cannot get a conventional mortgage, so will need to get a DSCR or bank loan, which often has higher interest rates and a balloon payment.

If you go the route of putting it in your name, you can get a conventional 30-year mortgage. To provide added protection, you may want to beef up your insurance.  

I've gone both routes in the past.  Those properties that I had in my name I had $2.5M of liability insurance.  I used an umbrella policy, and slept great at night.

You mentioned that you do not want to use your personal credit, but until you get in the commercial space, you are almost certainly going to have to sign on every loan as a guarantor, even if the loan is not in your name.

Asset protection is important, but it can also be a distraction.  I see tons of people worried about having the perfect structure before moving forward.  If you are operating your businesses ethically, legally, and have good insurance, that covers the majority of problems.