Investor · brentwood, CA · Member since 2016 · 1k+ posts · 730 votes
5y
Never used one in 20 years, and I've avoided all the expense of setting them up, costs of maintaining them and the cumbersome and convoluted administrative aspects of operating with them.
But I must admit I have missed all the benefits of being able to hobnob with those pretending to be players by showing off my all my LLCs. It's been really rough in that regard, but I'm working through it.
Rental Property Investor · Member since 2019 · 304 posts · 462 votes
5y
As mentioned previously, trying to purchase under an LLC can be difficult when trying to obtain mortgage financing. A better strategy is to buy it personally, then transfer title to a land trust with an LLC as the beneficiary. Transferring to a land trust does not trigger the "due on sale clause" but be careful that your loan documents do not include a title transfer fee which could be up to 1% of the value of the mortgage.
Rental Property Investor · Member since 2019 · 304 posts · 462 votes
5y
William Garcia, Yes you can. You need to set up the LLC in a state which provides anonymity. There are a number of steps you need to take to stay off the radar. DO NOT list yourself as the trustee of the land trust, or list yourself as the manager of the LLC. This is a matter you need to take up with a competent asset protection attorney. If not done properly, it can be taken apart if you are ever sued in the future.
Rental Property Investor · Member since 2019 · 304 posts · 462 votes
5y
Erik B, Congress passed the Garn-St.Germain Act in 1982 which exempted transferring of title to a land trust from the "due on sale" clause. You can read the legislation here. https://www.investopedia.com/t...
Some banks may have attempted to invoke the due on sale clause but a competent attorney could have blocked it. The other caveat is that they can still impose a transfer fee so read your loan documents to see if a transfer fee clause is included and how much that fee can be.
Rental Property Investor · South Bend, IN · Member since 2020 · 19 posts · 10 votes
5y
How does this work when using hard money lender? The lender who is financing our repair required us to put the house in LLC as one of the requirements to qualify for the loan. We paid cash for the house, the hard money lender is funding the repairs. Do all or majority of hard money lenders won't finance a deal unless it is in LLC?
Not sure exactly, but I hear its pretty common. I see it as basically for their protection. Since you are most likely running a business, a business with increased liability than a regular home purchase, by putting the property into a LLC is "isolates" the liability, if the LLC is handled properly. Otherwise, some other deal you could be working could jeopardize the property they have lent on... Make sense?
Rental Property Investor · Huntsville, AL · Member since 2019 · 21 posts · 7 votes
5y
One advantage I don't think has been mentioned is that an LLC can issue a K1 to its member(s). Several different entities can issue K1s, and those are less likely to be flagged for an audit. With that said, no matter whether you do it on your own name or under a trust with a 1041 or get a K1, you should keep impeccable records just in case you do get audited.
I personally have seen that having an LLC definitely drives home the fact that his is a business, not a hobby. Also, an LLC opens up other sources of funds like BLOCs that you can grow overtime to make bigger deals.