Partnerships/Loans/LLC for OOS Investing

[Gabrielle Reyno]

Hello!

I am new to real estate investing and planning to purchase a long term rental out of state (as I live in San Diego, CA) in the next 3-6 months. I have two partners and we are planning to put 25-30% down (total) and get a conventional mortgage loan. However, we have some questions:

1. Do all 3 of us apply for the mortgage loan together? Or should only one of us be on the loan and the other 2 people simply be investors? If only 1 of us is on the loan, is that person the only "owner" on title? We can likely each qualify for the amount needed individually.

2. Should we form an LLC prior to purchasing a property?

Thank you!

Gaby

[Chris Seveney]

Quote from @Gabrielle Reyno:

Hello!

I am new to real estate investing and planning to purchase a long term rental out of state (as I live in San Diego, CA) in the next 3-6 months. I have two partners and we are planning to put 25-30% down (total) and get a conventional mortgage loan. However, we have some questions:

1. Do all 3 of us apply for the mortgage loan together? Or should only one of us be on the loan and the other 2 people simply be investors? If only 1 of us is on the loan, is that person the only "owner" on title? We can likely each qualify for the amount needed individually.

2. Should we form an LLC prior to purchasing a property?

Thank you!

Gaby

If there are several of you, I would recommend getting an LLC and spend the time to have an attorney write up the operating agreement which will indicate who owns what and if this then that. You want to consider every situation and try and include it. This includes things like, what if someone wants to get bought out, what if there is a cash call, what if someone puts in more money, what if someone is doing more of the grunt work, what happens upon exit.

For the mortgage, that will be a decision that the three of you will want to make and decide upon. You may want to look to get it in the LLC in this instance as well.