LLC before first investment property?

Question

I am new to the game and interested in buying multifamily investment properties. I'd like to form an LLC as a rental property owner and am wondering if that is done prior to purchasing my first property or after? Are there any step by step instructions on how to do this? Are there people that help with this process and if so how do I find them?

Jeremy P. · Answer

Thank you. I appreciate the advice!

Audrey X. · Answer

@Jeremy Petrous

Financing for LLCs are more expensive than under your personal name. Most mortgages have a clause that prohibit you from transferring the property from your own name to an LLC.  If this is your first investment property, getting a good insurance coverage is probably adequate.

Jason Wray · Answer

Jeremy,

Depending on what state your in there may be a State website for division of corporations.  If not you could always use Legalzoom.  You pretty much choose a name, choose your registered agent, Managing member, Manager, create an operating agreement, File articles of Incorporation.  Depending on your situation you could be sole or list spouse or business name DBA as agent.  Just google those terms or check out legalzoom for tips.

You do not need to have an LLC before you buy a MF if it's a (2-4 Unit).  You may want to have it established prior to purchasing a MF 5+ Units.  That is really for more of the legal/insurance factors but not really for financing.  Keep in mind you can always obtain an umbrella insurance policy if liability is of concern and avoid the LLC.  Again unless your planning on buying a MF 5+ Unit or a larger commercial property it could be necessary.

If you are thinking of buying a MF 5+ unit or higher makes sure you qualify before you waste your time with a n LLC.  Meaning anything over 4+ units requires landlord experience and current rental properties/income management track record.

Terrell Garren · Answer

Probably more threads on this than any other topic, with the exception of "I want to invest in RE but I have no money." Use the search function and read for hours.