I am interested in buying a 2-3 unit multifamily house in JSQ are of Jersey City as an investor. All the units are for rent. A few questions for the experts here :
1. Setting up an LLC
When should I set it up? How do I set it up? Anything special I need to consider while setting it up? Any advice on who to contact first?
2. How easy is it to get Mortgage as an LLC vs as an individual? Are the rates quite different? I am looking at 650k property and will put in 250k down payment. Any advice where to start looking for rates.
3. Location wise : has anyone recently done any transaction in this area? What will be your suggestion?
@Amit Sinha you're better off purchasing it in your name to get lower costs on your mortgage then transferring it into the LLC. In most cases the lenders never call the loan so you should be fine. It's a risk but again as long as you keep paying it seems the majority of members here haven't had an issue with doing it that way. If you purchase thru the LLC there are some lenders who will also do a 30 year loan now in NJ. So it's really your choice. The rates will be a tick higher though. $650K for a 3 family in Journal Square seems a bit low at the moment (depending if it's actually near Journal Sq as some realtors will say it's near there but it really isn't in my opinion) . Putting $250K down also seems high.
@Amit Sinha you're better off purchasing it in your name to get lower costs on your mortgage then transferring it into the LLC. In most cases the lenders never call the loan so you should be fine. It's a risk but again as long as you keep paying it seems the majority of members here haven't had an issue with doing it that way. If you purchase thru the LLC there are some lenders who will also do a 30 year loan now in NJ. So it's really your choice. The rates will be a tick higher though. $650K for a 3 family in Journal Square seems a bit low at the moment (depending if it's actually near Journal Sq as some realtors will say it's near there but it really isn't in my opinion) . Putting $250K down also seems high.
1. Some people like to set up their own LLC and file the paperwork themselves, others have their preferred real estate attorney do it for them. If you want to set it up yourself you can google "How to Setup LLC in (your state)." We always use an attorney to file the LLC and draft the paperwork though since it is just a little more and we have the piece of mind of knowing we didn't screw anything up!
2. It would be best to speak with some local lenders in the area, smaller banks and credit unions are generally best. Like Darren pointed out, usually the interest rates are a tad bit higher and amortization may be a little shorter. Our preferred lender doesn't really care if it's in an LLC or not - if its an investment property then it gets the same loan products regardless if a corporation or individual owns it.
@Amit Sinha why would you do the loan under LLC? COnventional market doesnt allow to close under LLC, you can put the property under LLC after clsoing, only subprime market allows closind under LLC, the difference is in the rate and clsoing costs. you could expect a 5.125% 30y fix, no origination or discount points on conventional but on subprime you will pay 2% origination points