Which comes first? Company or the properties

Question

Hello all,I am newer to REI as well as BP and I'm close to looking at actually obtaining my first property. I was wondering, is it better to start a company such as an LLC before I start buying properties? Or does it make some sense to just start off doing so in my own name until I get a handle on things and have more than a few properties? I intend to do a little bit of all REI techniques with said company. Thank you all in advance for the assitance. -Vincent Gamboa

Ruth Bayang · Answer

Hi @Vincent Gamboa. What are you planning to do with properties? Buy and hold? Flip?

I'm not an attorney or CPA and this is my opinion only. To just get your first one, it doesn't matter. Do it in your own name.
But if you want to do this as a business, you will need one LLC for flipping and a different for your buy/holds.
Are you a member of REAPS (reapsweb.com) ? Come to a meeting (first one free) if you haven't. Lots of people in RE and businesses that support RE investors there, including attorneys and CPAs who get RE.

Rosston Smith · Answer

Just use an umbrella policy until you amass a decently sized portfolio. It is not necessary for you to have an LLC at this time.

Timmi Ryerson · Answer

Vincent,

As you mentioned registering your actual entity in the biz plan of your choice is relatively simple.  But the plan for execution of your business is much more important.  For what you have said, you plan to buy and flip and also buy, rehab and tenant.  Both are great models. But have you a way to manage the organization of tasks and you should have that in place before you get started.  There is software at Secure Capital Network to help you with the due diligence and purchase process. They also have a clearing house of properties for sale that you can actually bid on right through their software.  They partner with Smart Property Systems which provides full service property management software with double entry accounting.  You will want to learn the software before you make your first purchase so that you will be ready to go as soon as that happens.  Best of Luck!!  You are about to start a very exciting adventure.

Ruth Bayang · Answer

@Vincent Gamboa REAPS is the largest nonprofit REIA on the West Coast and among the top in the nation. I just got home from a meeting ... great group tonight with interesting discussions, exchange of vendor information and sharing of knowledge.Hope to see you at the next one.

Ned Carey · Answer

@Vincent Gamboa creating a company like an LLC is relatively quick and easy, presuming you know what you want. I can create on in 1 day in MD. So there is no need to create the  company well in advance. You can create it between the time you put a property under contract and when you close.

Whether you should have an LLC or other entity is a more complex issue. You will find plenty of discussion on the subject here if you do a search.

In part it depends on what assets you have now to protect. Many people operate under their own name or a DBA (doing business as). They just  count on insurance to cover their risks.

An LLC is not a substitute for insurance. It can add an additional layer of protection. However LLCs do not provide as much asset protection as many people think.

Regarding taxes It probably wont make much difference. The devil is in the details it could make a tiny bit of difference regarding start up costs.

Vincent Gamboa · Answer

@Ruth Bayang I plan to start off flipping at first to build up some capitol to then later jump into the buy and hold side.

I have not heard of REAPS until now, thanks! I will definitely look into it, as it seems like a good way network and find more guidance. Thank you for your time!

Which comes first? Company or the properties

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