LLC set up Chicago

16 Replies

Hello BP. Just a quick question. I was wondering if it would be best to set up an LLC before making a deal on a multi family property? I'm looking to set up a series LLC for buy and hold strategy. Thanks.

@Brent Mattison - what size multifamily? under 4 units tend to be residential loans which cannot be funded to a LLC.

@Brent Mattison you don't need to do that until you have a property under contract but it wouldn't hurt to get started.   And, like @Brianna Schmidt said, this would only be for 5+ unit property unless you buy the 2 - 4 unit with cash (not recommended unless you have strategy for getting you cash back out) in which case you should use an LLC to limit your liability.

@Brianna Schmidt, I looking at 5+ units. Thanks Joe for the advice as well.

It is always better to buy the property in the LLC to avoid having to deed it over later and pay an attorney to draft up & recording fees plus your name is never connected to the property either. Not sure where you property is but in Chicago they started last year you need to get a final water reading in order to deed it over so the process takes 6-10 weeks to deed over plus your attorney migh charge you more.

Interesting @Mark Ainley  - I did not know that.  Is it only for 5+ in city limits?

@Mark Ainley I looking at a few different neighborhoods in Chicago. Thanks for the information.

@Brent Mattison  

Hey Mark - just throwing a wrench in the program (for caution and question not to damage) I spoke with an investment banker yesterday at US Bank that seems to be steering me away from what my attorney had me set to do, and that's a Series LLS. He said that they (US Bank) do give loans to LLC's when they are set up individually without the series and showed me a few programs they have.

Not that - that is what you are looking for but it was new to me. I'm setting up to have him, my attorney, and myself go over these issues and then I'm relaying it to my accountant for his suggestions.

Jus thought I'd throw that out there.

Sorry Brent I keyed Mark by mistake

@Timothy Riley. Thanks for the information. I was looking to do a series LLC, depending on what I could find here. Thanks again.

Yeah, I heard the same thing last week from my attorney, @Mark Ainley and @Brianna Schmidt - that you'll need a water cert in that situation. I think it applies to residential as well as commercial (at least, the context of the discussion with my attorney was residential).

the water cert applies to any transfer of any real estate.

We have a series LLC that we started 5 years ago and it is much more affordable than seperate LLCs but this week in conversation I heard there is a active court case that people are watching closely that is testing the true intent of the Series LLCs corporate vail. I will try to locate that. The cool thing about a series LLC is you can have different ownership per each series and you only need to file one tax return.

Also last week there was a proposal in Illinois Senete to reduce the cost of set up for an LLC which would be reduced to $99.00. This is being pushed by SBA but I heard that didn't make it out of committee.

@Brent Mattison

Great question especially if you are trying to protect your investment.

I am a real estate broker as well as property manager. I set up a series LLC in 2012 and I have been placing my purchase into separate series.

The approach behind a series LLC is that if you own 10 properties, you could assign a series to each property and don't have to create 10 LLC.

In addition, by placing each property into a separate series (in case of a lawsuit), they can't touch the other properties.

Last thing that I would like to point out is it's always a good idea to title properties under LLC vs your name because you are more protected under LLC especially if you have more than one property.

And you only file one tax return with series LLC.

Hope it helps.

A good insurance policy is better than an LLC. If you do get sued, they can sue you and the LLC and when you are requested to give a deposition what are you going to say if the lawyer asks do you own any other proprieties in your name or an LLC. Are you going to lie?

Joe Gore

@James Syed thanks for the information. @Joe Gore that's a good question. Thanks.

@Joe Gore Can you elaborate on what a good insurance policy looks like in the context of rental properties? Is the policy written on the LLC or a personal umbrella policy?

The ones here in Texas are written on the property, and the owner of the property regards whether it is in an LLC or not.

My 2cents,

Joe Gore

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