I am brand new to real estate. I was advised to start an LLC, open a business bank account, and then seek out investors. What do I need to do to establish a relationship with an investor, and what questions do I need to ask to get my new business off the ground?
I'm a real estate investor for nearly 40 years, and I have yet to place my rental properties into an LLC or use a business account.
The idea of an LLC is to mitigate your liabilities, and this could be taken care of with adequate insurance. A personal checking account cost less fee wise than a business account. For instance, I have more than one personal checking account at a major bank, and it's fee free due to the banking relationship. One of them is for my rentals. Also I have a business checking with another major bank, for another business I have which I'm paying $15.00/month in fees.
Also, online transfer of funds between personal checking is fee free. It may not be so between a personal account and a business account. For my rentals, I often have to shift funds between personal and business when funds run short.
Getting a mortgage via an LLC is more costly, if you can get it, and you have personally guaranty anyway. I had an LLC for a business , new, with no history and I have to guaranty everything. Getting insurance is a lot more complex. Normally if people sue you, they sue the LLC and you anyway. I know a business owner who use an S Corp, to shield his liability, bought liability insurance, and his insurance agent didn't know enough to add an endorsement including him. Net result was he was sued for $2 million, and the S Corp and him was sued, and he was not personally covered. They told him to get a lawyer for himself, as the insurance company attorney is for the S Corp. He thought the S Corp shielded him, and it did not. He apparently didn't use a knowledgeable insurance agent.
So, for your first rental, keep things simple, make sure you use a good insurance agent, and you should be OK.
Most investors will feel a lot more easy if you have some deals under your belt already. I’d try doing a few yourself before you seek investors. Just by doing that, you’ll likely answer all these questions yourself throughout the process
@Lisa D. Hamblin , There are no blanket, one-size-fits-all answers. It depends heavily on your starting point, and everyone starts at a different point. Here are a couple things to help you get started.
Plan on attending the next local meetup, it's Nov 13th. You'll find a lot of local people there willing to help. Details are at the link. https://www.biggerpockets.com/forums/521/topics/49...
Give me a call, (Not Monday) and we can have a brief discussion about where you are starting, and what your goals are. Then I can give you a much better answer about what your next steps are.
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