Austin, TX · Member since 2016 · 2 posts · 0 votes
BP friends, seeking your advice. A friend and I are diving headfirst into real estate investing. Our goal is building a successful investment portfolio. I bought/financed our first rental. He bought/financed the second one. Both units were bought as individuals (as I've learned its hard to finance under a LLC). Now, I'm trying to see if I can bundle everything under a LLC for asset protection. Here is what I'm trying to decipher:
1. With mortgages at big bank(s), is it possible to shift these properties under a LLC?
2. If not, do you recommend adding each other's names to the title(s)? Any other recommendations?
3. Is a biz bank account necessary - or can we flow finances thru a standard consumer checking/savings account?
Obviously, we are building operating agreements to protect the partnership. My concern more so relates to liability ensuring both of us are protecting our other personal wealth/investment/businesses.
Property Manager · Oklahoma City, OK · Member since 2016 · 87 posts · 69 votes
9y
I wouldn't necessarily use an LLC here - if you transfer ownership of the properties, you trigger the bank's right to call your loans due. You could just contractually agree to share income and expenses and keep separate ownership of the properties. And use insurance to mitigate the liability risk.
Atlanta, GA · Member since 2017 · 63 posts · 12 votes
9y
My partner and I just did this. Our attorney was adamant that each property is kept in its own LLC (unless your states recognizes series LLC') and has its own bank account.
All income and expenses need to stay in the same account for the individual property.
Yes you need a business bank account and address.
Think you could also organize as a general partnership agreement that holds all your LLC's.
Regarding financing. I don't know enough about that yet but we've been told it is all based on our individual income and credit until we build up a big enough portfolio.
Property Manager · Oklahoma City, OK · Member since 2016 · 87 posts · 69 votes
9y
I wouldn't necessarily use an LLC here - if you transfer ownership of the properties, you trigger the bank's right to call your loans due. You could just contractually agree to share income and expenses and keep separate ownership of the properties. And use insurance to mitigate the liability risk.
A standard landlord policy on each property, with the maximum amount of liability coverage (should be at least $500k, some providers will go higher). You could also look at an umbrella policy on top of that if think you need it.
As to your business arrangement, you could still use an LLC, but leave the properties titled as they are now. Or you could do a joint venture agreement or something similar that would not require a business entity. Either way, the concept is to share the rents and expenses across the two properties. And possibly share in profit/loss upon a sale of the property.