How many properites can you purchse under an LLC?

Question

Will you have trouble getting loans after 10 proprties? The same as an individual?

I am looking down the line for a future partnership and this came to mind.

Justin White · Answer

Account Closed I understood what you were saying with portfolio lenders, Mr. Childress asked about financing so I thought it would be worth letting him know of some other options that might fit his situation.

Steve Vaughan · Answer

What I don't recommend for sure is quitclaiming a house into an LLC  later.  That can negate your home insurance and title insurance.  Not to mention possible DOS violations on your loan.

As you ask lenders and insurers about buying residential property inside a business entity, you will get a sense of the potential problems. The extremely low probability of the slip and fall lawsuit the LLC is suppose to protect you from isn't something I fret about.  I just operate above board and carry good liability protection.  An umbrella policy as well as your assets grow is a great idea.

That's just what a laymen has done.  An attorney that once heard of a massive lawsuit one time 12 states away will recommend LLCs, trusts and all kinds of things.  They won't be there to help you with your acct or tax reporting.  They won't be there when you are uninsured and don't know it. Ask and research before you act is all Account Closed.

Steve Vaughan · Answer

You can put a basically put an infinite # of properties under an LLC. Probably not prudent, though or the question to ask.  I base my decisions on business purpose and asset type and value.

Basically what works for my buy and holds is commercial/5+ unit apts up to $2mil.  Then another LLC.  I keep my little houses in my name with good insurance.  I've found residential property to not be a good fit for residential borrowing and insuring inside a business entity.

If one is only operating/short term trading in RE like flipping or wholesaling, an LLC may not be the best entity structure at all.  Other types may offer SE tax advantages.

At the 10 loan limit, most seek portfolio lenders, partners or seller financing in an entity or not.  Business credit alone is very difficult to establish at the level bank lenders need for you not to sign personally Account Closed.

Seek professional tax, legal and insurance advice prior to building your entity foundation. Avoid a high consequence oops!

Eric Schleif · Answer

Check with your local lender. Most banks/lenders will want the LLC to be a single asset entity or SAE on a standard commercial deal. It gets complicated for both you and the lender if an LLC has multiple properties. The only time I see more than one property under an LLC is in 2 instances:

1. On portfolio deals where all properties are underwritten separately and cross-collateralized or as an  I saw someone mention that weren't able to sell one of the properties in their portfolio loan. That's true most of the time as standard lending terms won't allow it, but you can negotiate having the lender offer release provisions in the loan documents that would allow to sell one or more properties in a blanket loan.

2. As a one off where you form a LLC and take separate loans on each property under the LLC allowing you flexibility to sell one of the properties. Typically you close all the loans at the same time. But there was language in the loan docs that would not allow the LLC to purchase any additional collateral.

Bottom line, most lenders won't want more than one property in LLC because if another asset in the LLC if you default on one of the assets then that bank/lender can force a foreclosure and all assets in the LLC are going be part of the foreclosure.

Nicole A. · Answer

I imagine different banks have different rules for LLC lending. So just get as many as you can or are willing to put into one LLC. I would recommend the LLC be operating in the state that the rentals are in. So if you have 5 properties in a Maryland LLC, but then go buy 6 properties in Florida, I'd personally recommend opening a Florida LLC for those.

Jonathan Spearman · Answer

Great question!

Account Closed · Answer

Thanks for the explanation @Eric Schleif.

Account Closed · Answer

Ok! Great info @Steve Vaughan and @Justin White I appreciate the feedback.

Account Closed · Answer

@Justin White can you bundle properties at anytime or do you have to have a certain amount?

Account Closed · Answer

Great info @Steve Vaughan. So, you recommend keeping SFR under your personal financing for benefits such as insurance?

How many properites can you purchse under an LLC?

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