Out of home state purchasing

7 Replies

I'm in the process of setting up my LLC for Massachusetts. I am looking at several other states for purchasing property such as New Hampshire and Louisiana. Two questions: 1, do I need to register my company in each state I do business in? 2, through your experiences should I look for lenders in the local market or in my home area? Thanks.

Yes you would want to register as a foreign LLC in each state you are operating in.

If your looking for loans for commercial properties than you will have no issues with purchasing in your LLC. If you are doing single homes and duplexes your going to need to purchase in your own name to get residential financing.

Yes, you'll need to register in each state where you buy property, and you should look for lenders in the state where the property is.  

In your case, many lenders who work in MA also work in southern NH, so simply ask them.  As for Louisiana, that may be a different case.  And understand that many local lenders may not lend to out of state borrowers.  

Or you would have to look for national or regional lenders

You can't, for instance, use a MA hard money lender to lend in LA unless that person specifically lends in LA.  And the local LA lenders may not want you.  There are extra challenges with buying out of state.  

Moving from MA to NH is not really considered out of state because of the small distances and the fact that many lenders work in both.

Thank you, I have many contacts and resources from my military background that are assisting me with the "Louisiana Purchase" I am looking at a block of 3 duplexes to hold and rent. I will now focus my financing there.

@Craig Naylor Welcome,

big difference in price Louisiana vs Massachusetts, huh?

If you form an LLC in any state you will have to register it in any other state you will be doing business in (i.e. any state you will own a property in it).

MA is a very expensive state to form and maintain an LLC in. $500-520 to form and for your annual renewal. If you aren't using it in MA there is no point in forming it here and then registering it in other states.

My advice is figure out where you are going to buy the first property and form the LLC there. I don't know what you have to pay and do in LA to get one but I'd bet good month it is cheaper than MA, and even if there is a good size fee it is unlikely you will pay any less to register it as a foreign entity from MA. After that you can weigh the pros and cons of using the same one and registering it in other states or just forming new ones in each state.

All that being said how are you looking to get these 3 duplexes? If it is cash then definitely get an LLC. If you want to bundle them and treat it like 6 units and get a blanket commercial loan on them then use an LLC (Side note look over the provisions for a partial release in case you want to sell 1 of the places). If you want to get individual loans on them I think you will want to buy them in your own name to get residential rates on them. You aren't getting 30yr fixed mortgages in 4% rates with commercial mortgages through an LLC. Just as an overview you will be looking at a higher rate, shorter term, more fees and probably a larger down payment than with a residential loan. So those loans will be more expensive, require more cash up front and it will likely dramatically reduce your cashflow with the higher rate and shorter term.

I remember there being a big difference in property costs between Mass and Louisiana; I lived in New York, Maine, Vermont and Massachusetts when I was younger and moved to Louisiana for the military. I remember houses being more expensive in New England...

"Four of the six New England states made CNBC’s list of the 10 most expensive places to live. Only New Hampshire and Maine were excluded. Connecticut was ranked the second most expensive state in the nation, with Massachusetts, Rhode Island and Vermont coming in eighth through 10th"

(http://www.boston.com/real-estate/news/2015/06/28/shocker-really-expensive-live-new-england/2uxLLqu2NxuWICjR0xWidN/story.html#sthash.6jG2yrIG.dpuf)

It's a shame, I was born up there, I'll always love New England... just too expensive.

Austin

If you can make it here, you can make it anywhere.  They certainly do not make it easy.

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