I am trying to plan out my start into Real Estate.
My plan is to save some more money over the next 6 months to purchase a cash property while at the same time just register for an LLC and work on building a credit line over the next 6 months just so that my LLC has some sort of credibility out in the credit world. I was thinking of purchasing my first property and having it under my LLC and use the BRRR method.
But I've been reading how difficult it is to find a bank to refinance and cash out with an LLC so I was thinking maybe I should just stick to doing it under my name for the first 3 properties and then just grouping them together under a portfolio at a later time? Any thoughts?
If you are buying all cash to get the property setup, an LLC would be fine. If you want to cash out later, then you are correct that you'll have issues finding lenders since you'll be limited to commercial loans.
Obviously, you wouldn't want to leave the cash tired up in the property.
Your best bet would be to make the decision at the time of purchase after speaking with a few lenders. You might be able to get a portfolio lender that might be able to help you out with and LLC.
Then again, LLCs are expensive in California compared to other states.
My advice to make sure have more insurance and if you do the LLC keep up as true LLC they can be easily pierced. HML could be a good option for you.
If you go with an LLC you'll have to refinance using a commercial loan since Fannie/Freddie don't do LLC's.
It's not a big issue you will just have slightly less favorable terms and rates than conventional.
If you want the best rates and terms and you qualify for conventional that will be your "cheapest money".
Regardless it can be done either way it really just depends on your specific financials and situation.
Thank you guys! I think I'm going to stick with having them under my own name to start with and work my way up to an LLC once I have gained a little more knowledge through the processes and have a few properties under my name.
Thank you for the feed back!!
The question has already been answered, but it can go either way and really depends on how you are using the LLC to protect yourself, if you are using it to protect yourself in case of default on the loans then it probably isn't worth it, but if you are using it to protect yourself from tenant lawsuits it may be worth it. There are lenders that will lend to LLCs, I happen to know one, they are more difficult to find but they do exist.
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