To LLC or Not to LLC. What Gives?

4 Replies

So, as someone new to REI, the whole LLC vs not LLC debate is a bit confusing. I believe I heard @Brandon Turner say on a podcast that he basically did a different LLC for each group or partnership if you will. So, if he and his dad partnered, that would be an LLC. He and his wife partnered, that would be an LLC, and so on.

LLCs sound great. I've setup a couple of them for other businesses. Then I learn that it can be a challenge or that lenders typically don't loan to an LLC. Ok, purchase it in your name, then transfer to LLC. But, then the lender can call the loan.

Why isn't there a simplified way to get a property under the ownership of an LLC? It seems like buying directly under the LLC doesn't work well and transferring to an LLC has some major risks.

What gives?

LLC is not necessary but it gives me comfort. You can buy subject to and owner finance deals and have title in LLC. Private and HML don't care if they lending to an LLC. They want to know when do I get my money back and what interest rate and points up front I can get in mean time.

Originally posted by @Michael B. :

So, as someone new to REI, the whole LLC vs not LLC debate is a bit confusing. I believe I heard @Brandon Turner say on a podcast that he basically did a different LLC for each group or partnership if you will. So, if he and his dad partnered, that would be an LLC. He and his wife partnered, that would be an LLC, and so on.

LLCs sound great. I've setup a couple of them for other businesses. Then I learn that it can be a challenge or that lenders typically don't loan to an LLC. Ok, purchase it in your name, then transfer to LLC. But, then the lender can call the loan.

Why isn't there a simplified way to get a property under the ownership of an LLC? It seems like buying directly under the LLC doesn't work well and transferring to an LLC has some major risks.

What gives?

 If it was simple then everybody would be doing it. ;-)

From what I've heard most investors haven't had issues with the note being called on properties transferred into an LLC. However, I could see (speculation) that if you acquired a property via owner occupied and transferred it into an LLC immediately after you moved out (after 1 year requirement), then you could be more likely to have you note called. At the end of the day your best bet is to just speak with a loan officer at a reputable local bank openly about what you're wanting to do.

I know there are many LLC-related threads here, but thanks for starting this one.

Two questions always arise for me when it comes to LLC:

(1) what is the overall benefit versus the cost/time of maintaining?  I understand the legal/financial protection, but if insured properly, or it the owner has an umbrella policy, overall, the benefits are somewhat minimal, no?

(2) if you have the property as an individual investor, how would you transfer to an LLC without having to repay the mortgage in full? Conversely, how does one go about obtaining a mortgage or other financing as an LLC without tremendous assets and/or years of experience? (I have been in RE for about 13 years, but only expanded to a second property in 2017). Are we talking SBA? Are rates higher?

Thanks all!

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