Investor · Philadelphia, PA · Member since 2014 · 205 posts · 52 votes
Good Afternoon BP,
I know this is a discussion repeated quite often, however I wanted to address a specific item, and with so many financing professionals on here I am excited for the responses.
Situation:
I am buying a triplex in cash, renovating it, renting it, then refinancing shout out to @Brandon Turner's BRRR. I intend on purchasing through an LLC, however when I refi I will need to get a commercial loan whose rate adjusts every 5 years (per my understanding of the structure of such loans). If i were to purchase as an individual and the refinance I believe I would be able to lock in a long-term low rate.
So is the LLC's protection worth the likely higher rater which will adjust in 5 years? Am I wrong in my analysis? Please weight in!
Hi @James Brand, I would always play the safer side of going with an LLC, especially if you plan on renting it out. The potential risk (litigation, insurance, etc.) far outweighs the potential upside of a better rate.
There is little to no benefit using a LLC as opposed to simply having adequate insurance. Insurance is required either way and will always be the first line of defence. If the property is financed/leveraged there is little to fear.
Try asking if any BP members have actually needed/used/been protected by having a LLC in a real life situation or is it simply psychological protection.
.A LLC will only complicate your investing and cost you more annually to have.
I have chewed on this exact question myself and I plan on financing in my (and/or my partner's) name and then quit claim deeding to the LLC once the loan is locked in. Best of both worlds, as long as the loan is something you're good having locked in long term and won't need to refinance anytime soon.