Form LLC before or after first investment prop acquisition?

Question

I know we have lots of LLC questions in the forum but will ask the question again. Looking to buy a fourplex. Do I need an LLC at this point or if I have more properties? Does it matter if you form the LLC before or after the acquisition of first investment property?

Matt Devincenzo · Answer

Yes residential loans are only available for individuals not entities.

So 2 new things for you to consider and research here.

First if you buy in your name and have a loan you can QC deed to an LLC risking the due on sale clause, the question is now does that pierce the corporate veil?

Second; many advocate holding in your personal name for just a couple properties and having an umbrella liability policy to protect you. Question is if that is enough?

Not saying what you should choose just use the search function and read novels on the pro's and cons here on BP and then you can make your choice.

(No legal advice)

Peter Fokas · Answer

Was informed by mortgage broker that if put property under LLC name then cannot get a conventional residential mortgage. Only can get commercial mortgage.

Jay S. · Answer

You will have plenty of time to set up the LLC between the date you sign the contract and the closing date.  Have the name of the LLC that you want to form as the singatory to the contract (make sure it is available first - and address LLC will usually be - 123 Main Street, LLC) or have the right to assign it.  I wouldn't bother with it until then - waste of time and money at this point. I do suggest one though.

Ned Carey · Answer

If you own the property in your own name - liable
Own the property in the LLC - protected by LLC (this is not total liability protection, probably more risk than many are aware but that is a separate issue)

If you buy the property in your own name and then later put it in to an LLC, you are personally liable for the period that you owned it. You remain liable for anything that happens in that period for the statute of limitations.

Good luck - Ned