Real Estate Investor Starting Out - Tips/Advice

Starting Out
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Real Estate Investor Starting Out - Tips/Advice

Alexander Warren Leitch
OK · Member since 2019 · 1 post · 0 votes

Hello,

I am looking to start out (Oklahoma) with buying my first property within the next year and doing all the research and reading I can to prepare. A few things I want to see where people stand about:

  • Current thought would be form Single Entity LLC and use that as the medium to purchase property but I have heard varying ideas about the LLC's viability to make such purchases. I am not looking to get into a balloon payment.
  • Can I make the purchase using my own financials/credit etc and transfer at a later date?
  • I already own two homes with one already being rented and one I would like to list for rent within 12 months as well. If I form an LLC, should I transfer to the LLC or wait for a larger portfolio and why?
  • With and LLC can I transfer funds from the LLC to my personal account without considering it "payroll" and subject to tax since it is considered a disregarded entity?

I am sure there are other questions I should ask but this is where I stand so far. Thank you in advance.

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  • Antoine Martel
    Rental Property Investor · Miami, FL · Member since 2017 · 2k+ posts · 911 votes
    7y

    Alex.

    No need for an LLC quite yet, they're easy to make when you need them. You are going to want to buy the property in your personal name so that you can get the best financing. Then after you close you can move that property into the name of the LLC but its not required.

    LLC will not help you save money on taxes, because you will be getting financing on these properties in your personal name and not your LLC

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  • Cassi Justiz
    Rental Property Investor · Edmond, OK · Member since 2017 · 1k+ posts · 1k+ votes
    7y

    Hey @Alexander Warren Leitch, 

    I agree with @Antoine. I don't think I would set up an LLC just yet.

    I would start out by visiting with a CPA and/or attorney and about what you want to accomplish with an LLC. You could also bring up the idea of a trust. An attorney or CPA could help you choose which one would be the best option for your goals. They can guide you depending on whether you are looking for liability protection, tax benefits, etc.

    You may find that an LLC is not going to work well for your immediate goals on the investing side. We set up an LLC to purchase with and then realized that commercial lending wasn't something we were ready for. We didn't have the systems in place nor were we ready for 15 year adjustable rate mortgages when we could still qualify for 30 year fixed.

    You can always transfer title from your personal name to your LLC, but lenders don't really like that. Most loans have a provision that could allow them to call the loan due if ownership changes. It doesn't happen often, but it's still something to be aware of.

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  • Deborah BurianPro Member
    Rental Property Investor · Oklahoma City, OK · Member since 2013 · 1k+ posts · 412 votes
    7y

    @Alexander Warren Leitch - welcome from a fellow OKC investor. Just to add a contrarian view, and it's my view, not the final answer; we started with an LLC, while it did affect our financing we liked it for a number of other reasons, not least of which was there was no question as to what was business and what was personal as far as taxes and income. Also, when we were ultimately too large for Fannie/Freddie financing, we already had a terrific relationship with our commercial lender and easily moved properties into a portfolio note.

    The question of how any LLC income is taxed has a number of potentially moving parts and is too complicated for a forum, best referred to a qualified CPA.

    If you DO purchase in your name and later transfer to an entity - it is easy and inexpensive to do through a title company.  For reasons too complicated to go into here we've done it in Oklahoma County and it was very simple.

    If you have any questions or just want to talk real estate, feel free to ping me.  Texting works better than calling.

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  • Thomas Murray
    Flipper/Rehabber · Greater Bosto, MA · Member since 2018 · 38 posts · 5 votes
    7y

    trusts are recognized in all 50 states and you can name your LLC the beneficiary. Doesn't trigger a purchase.

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