BRRRR Method, Cash Offers, with partners, LLC Setup?

Question

Looking to purchase multiple BRRRR deals with two partners. Our plan is to set up an LLC for each individual property we buy. We would like to name our LLC’s after the properties. Our question is do we set up the LLC before submitting offers, or do we submit offers and then set up an LLC as soon as it gets accepted. What is the best point in time to set up the LLC so the entire acquisition is as efficient as possible? With that being said, I’ve read that banks typically don’t finance to LLCs, which is fine as we’re buying all cash, but when we refinance, how does that work if the property is owned by an LLC? Any feedback would be greatly appreciated.

Jaysen Medhurst · Answer

@Anthony Gallo, no need to set up a LLC until you have something under contract. In the offer, as buyer put "Anthony Gallo and Partner 2 and Partner OR Designated Entity."

You will be able to hold title in the LLC, but you will still need to personally guarantee the loans. Talk with your lender about their requirements. They may want you to go with commercial mortgages. Terms won't be as good as owner-occupied, but then again, you're not owner occupying. One of our local CUs offers commercial notes with 30-amortization, 15-year term, and rates of 4.75%. That's very competitive. It's worth shopping around and establishing a great relationship with one lender.

Jaysen Medhurst · Answer

Do you have a clear operating agreement written up, @Anthony Gallo? That the biggest chunk of work. Don't wait on deals because of the entity thing.

I don't know if I would call what I outlined above "standard," but it will work fine. Have some conversations with your lender. They may have some other ideas on how to keep your mortgages as competitive as possible.

Anthony Gallo · Answer

@Jaysen Medhurst Thank you for the advice. So as far as investing with the BRRRR method with partners, the method you outlined would be standard practice, trying to get competitive commercial loans vs. the standard lending one would get if they were investing alone? We're ready to move on properties ASAP, it's the entity portion that has been holding us up, making sure everything is protected correctly.