Buying my first rental with my LLC

20 Replies

My LLC is up and running and ready to go. I am super excited and so are my members. My question is, if we want to buy our first rental what is the best way to startup. Do we buy cash/or finance under the LLC entity or do we finance under our own name since the business has not yet built its own credit.

If your LLC has no assets or history you and/or members will need to provide a personal guarantee for a loan. Another option is to buy cash in LLC's name and refinance with LLC but some banks will still require personal guarantee.

Well, i was thinking the same as Theo, my members are willing to put in our personal guarantee and buy a proerty under 50,000  cash under the Entity so we could have some sort of asset. How much money i have right now? There are 6 members in the llc with very good credit and i think we could probably get the 50,000 on cash between ua.

What type of investment are you looking at?  That will determine your down payment amount. 

Also you can get a loan under a new LLC however each member of the LLC may have to qualify for the loan from a credit stand point if there is a borrower who doesn't qualify for whatever reason you still may be able to get a loan depending on the lender but said borrower will have to write an acknowledgement letter and will not be allowed to be on the loan for the property.

Don't let the capital you have available dictate what type of investment strategy you take on. You want to assess all factors that play a part in choosing your investment strategy: risk, skill of the members (is anyone handy or know a contractor?), and reason for investing. Believe it or not, capital is actually pretty easy to raise, so if fix and flip is your go to and you don't think you have enough capital, I can connect you with hard money or private money lenders that may be able to help you purchase a better property (say, a 200k property all cash with an ARV of 550k). If rentals are the way you want to go, then capital wise you're okay, and you would just need to get a mortgage personally, then transfer it over to the LLC. Also remember you may have repair costs for a property to make it rentable, so you will have to factor that in. (Say, you need 30k down for a mortgage, but 40k for repairs to make it rentable, then you wouldn't have the capital needed for the investment).

Hope this helps and best of luck!

Hello Jonathan the progress is coming along well. I am in the process of "viewing" yesterday i saw couple of multi family property in connecticut area. It is an interesting market on a come up and i think imvestors should keep an open mind in this paticular market at its early stage and the state is very lanlord friendly. 

Waterbury,  Ct i will look into it. But one main reason i like connecticut , as i quote my agent, the state is super lanlord friendly and the price to manage the propery is vey low and taxes as well. You may struggle to get a nice in ncome bracket community because the jobs do not pay much. Thx for the lead....but check out Meriden, CT and i can even connect you with a nice agent there, her name is Maya and she is very helpful.

The best strategy I have seen for purchasing with the best financing options while maintaining the liability protection of an LLC is through the use of a Land Trust. Some banks don't offer loans to young LLCs, and when you do get a loan it will have higher rates than what you could expect in your personal name. The issue is that you can't purchase in your personal name and transfer the property into an LLC after the purchase without risking the lender using the Due on Sale Clause to call their note on you.

This strategy would essentially look like this: purchase in personal name > transfer to Land Trust > assign LLC as beneficiary of Land Trust. You would purchase the property under your own name to have access to the best financing options available. You would transfer the property into a Land Trust, which is an exempted transfer thanks to the St Germain Acts since it is considered an Inter Vivos Trust. From there you assign yourself as a trustee and the LLC as the beneficiary. The asset is protected under the LLC and you can still manage it.

There are more steps and more benefits involved, I just mainly wanted to present it as another option for you. Just another option for you, in case you were still browsing your options.

Best of luck to you moving forward! If you want more clarification feel to respond.

That is a great strategy...from your personal name to a land trust...and you as the trustee while the llc assigned as the benificiary of the land trust. There is power there. Because the "due on clause" business is very tricky. Also that is more layer of protection. 

@Johnder Saint louis usually these asset protection entity's are used to protect wealth, that doesn't seem to be the case here. You seem to have superfluously created extra costs and obstacles for yourself. I hope you didn't get this LLC/Land Trust advice form a Guru

Originally posted by @Johnder Saint louis :

Hello Jonathan the progress is coming along well. I am in the process of "viewing" yesterday i saw couple of multi family property in connecticut area. It is an interesting market on a come up and i think imvestors should keep an open mind in this paticular market at its early stage and the state is very lanlord friendly. 

I have a cousin who is a realtor over there and family who own a few properties. interesting market, i will do a trip over there soon to check it out. i hear good things. best of luck. let me know if you need anything

 

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