I am in the early stages of buying my first rental property. I was recently approved by a lender and when I asked the lender about lending to the LLC, his reply was to just buy it in my name and transfer it to the LLC after closing.
When I spoke with an attorney in PA, he said that doesn't make sense for me because of the 2% transfer tax I would get hit with.
Does it make more sense to 1. try and register the LLC to a state that doesn't have that transfer tax? 2. Look for lenders who will lend to LLCs? or 3. abandoned the LLC and just get an umbrella policy for coverage?
I appreciate all and any feedback! Thanks!
If you're early in your investing career, why are you putting the asset into an LLC?
@Cameron Tope The goal is to grow this and make it my full career. After doing some research, it looks like a lot of folks recommend the LLC route. If that's the case, I figured you might as well start day 1 with an LLC. Do you find it easier to cross that bridge after you have a couple of assets?
Yes, it's much easier to handle down the road - when you actually have things a plaintiff can take.
Have you thought about financing? Commercial financing is much more expensive than conventional.
Cameron is largely correct. The commercial lending to an LLC is more difficult, though I would slightly disagree on the financial protection. No amount of money is good money to put at risk, and so with an LLC you are protecting your personal finances against possible harm. Now, everyone hopes it never happens, but just like insurance we do things to protect against possible unfortunate situations.
Keep digging into the LLC, and speak with your CPA as well. As close as you are to the friendly State of Delaware, you may want to look into that. Circling back to Cameron's point though - there may be many banks that choose not to lend to a newly formed LLC. We had a tough road of it at the beginning as well and needed to start first deals with personal loans.