Rental Property Investor · Bethalto, IL · Member since 2014 · 319 posts · 103 votes
So we are still up in the air about starting an llc. We plan on meeting with an attorney this week. Any advice would help. four of us as equal partners. Looking to buy our first property soon and hopefully add one per year. Any advice???
Longview, TX · Member since 2012 · 368 posts · 131 votes
12y
I think it would be wise. You and your partners should spend a lot of time developing the operating agreement and company policies. I would imagine things could get difficult with four opinions of equal weight.
Investor · New York City, NY · Member since 2014 · 370 posts · 85 votes
12y
I am in nyc and moved my parents property from in their name to an llc. We got sued and I found insurance was as or more important than the llc. I think the issue is what happens when someone dies, wants out, etc. Get the llc but think out the scenarios.
Longview, TX · Member since 2012 · 368 posts · 131 votes
12y
I think it would be wise. You and your partners should spend a lot of time developing the operating agreement and company policies. I would imagine things could get difficult with four opinions of equal weight.
Real Estate Consultant · Lancaster, CA · Member since 2014 · 423 posts · 223 votes
12y
Definitely get an LLC. It makes it so that you do not personally take on the liability associated with the property. You need insurance no matter what, but the business entity separates your personal assets from the liabilities associated with the property.
Longview, TX · Member since 2012 · 368 posts · 131 votes
12y
I assume you'll need a bank account first. Get an EIN from the IRS and bring your certificate of formation for your LLC to the bank. This will probably be good enough to get an account. It was for me.
Getting a loan in the name of your LLC is much like any other personal loan, assuming the bank asks for a personal guarantee. I would expect that the bank will require an operating agreement, especially with four members (mine did and I am the only member). Expect several ARM products and a max 15 year fixed product. Probably 1.5-2 points higher than conventional mortgage.
I've done a $28K loan plus a $105K refi with no problems. Bank didn't require any seasoning on refi (done three months after purchase).
Real Estate Lender · Atlanta, GA · Member since 2014 · 48 posts · 9 votes
12y
With 4 members in the LLC remember that personal financial statements, credit scores, etc. of each member are needed for most loans. ( Sometimes not for strong properties, low LTVs or hard money. ) The viewed viability of the LLC by the lender is only as strong as the weakest member.
Denver, CO · Member since 2014 · 11 posts · 7 votes
12y
Also check on the laws regarding LLC's you area.
It can be advantageous in some cases to incorporate in another state with stronger protection for investors. Nevada, for instance, is well known for its friendliness to business interests.
This won't be an issue now, but as you grow this extra protection is reassuring to have.
Most investors we work with pod their buy and holds in clusters of 3-6, each with their own LLC. This compartmentalizes your liability in terms of assets and also makes selling the properties later in life much easier. The smaller portfolio size is easier to market and sell.