LLc vs Simultaneous closing

2 Replies

Good evening everyone. i am new to wholesaling properties and i am very interested in wholesaling my first HUD property. I have two questions about getting started. The first question being:

is it easier to use an llc to wholesale a property or to complete the closing with a simultaneous closing?

the second question is, is it important to market the property before i get my deal approved?

An LLC is a business entity that is used to limit liability, hence Limited Liability Company. To be honest, many times an LLC is useless because the business owner "pierces the corporate veil" which basically means that the natural person and the business become one in the same. This defeats the purpose of the LLC and reverts the liability back to the natural person

Before you do your first deal, I would make sure that you have a solid understanding of how the wholesale process works, i.e. offer, acceptance, contract forms, assignments, double closing, etc. You don't need an LLC to close a deal. You can close a deal without any business structure at all really, although I wouldn't necessarily recommend that. I would highly recommend consulting with a real estate attorney, preferably one who has dealt with investors, about what you are trying to accomplish and let him advise you on how to limit liability and what your obligations are. This will ensure that you are staying within your legal boundaries. If you cant afford an attorney yet, I would network with your local REIA members and ask these same questions there. They may not be able to provide you with legal advice, but they'll definitely get you thinking in the right direction. I'm sorry I couldn't provide you with a straight answer for question 1, but the answer really depends on the following question; What are your goals and what are you trying to accomplish?

On question 2, If it were me, I would not bother wasting my time marketing a property that is not encumbered by my contract. What happens if you market the property successfully and cannot deliver on that promise to provide said property? You're buyers will never trust your marketing and you will have no buyers in the future. You have no "out" on the "sell side" in that situation. I would rather have an "out" clause on the "buy side" based on inspection, or some other criteria. This out should be a rare exception, though. Not being able to close on a deal with a seller will leave them with a bad taste in their mouth and turn them off to working with investors in the future. Again network with your local REIA and find out who the cash buyers in your area are, take them to lunch, and build your network and your team.

Sorry for the long response and good luck with your future endeavors!

Sincerely,

Angel Cepeda, CPA

Thank you for your response Angel. Any information at this point is helpful as i will be attempting to wholesale my first property some time in the fall. I appreciate your your input and thank you for the encouragment