When purchasing my investment property through an LLC...

Question

When purchasing my investment property through an LLC, at what point during the transaction should I incorporate the LLC, with the address of the property as the name of the LLC?

Kelly N. · Answer

Hi,

What type of investing are you doing?  Do you have other people investing with you?

Assuming you are purchasing to rent out the property, hence naming it after the property, you can probably do it the way I have- Form the LLC once you have a closing date, set up bank accounts for operating and holding security deposits, then quitclaim the deed to the LLC after closing.   We're waiting to close on the second property and I am not a lawyer, so take this with a grain of salt.  I was concerned that changing the deed to the LLC might cause issues with the bank holding the mortgage, so I asked about that today and they said their business banker would even help me do it.  What a pleasant surprise!

I would think that if you have others investing with you, you'd want that in place prior to closing, and possibly prior to having something under contract.

Hope that helps,
Kelly

Terry Portier · Answer

I would say at the point where a judge or court is going to see the LLC functioning as an entity and not an individual. Otherwise don't waste your time and money on one.

Ned Carey · Answer

Technically the LLC should be formed before putting it under contract. How can a company that doesn't exist form a contract?

However it is common that the LLC is formed after the contract but before settlement.

The LLC name rally doesn't make much difference other than a branding marketing point of view. In that case the name would depend on what the LLC is going to do, hold rentals/ hold this one flip until sells?

Jeremiah Jarmin · Answer

Generally, I will create the LLC once the deal is under contract.  Then I will have the buyer (typically my client individually or another company through which they JV) assign the contract to the purchasing entity prior to closing.  In residential deals, we normally do it fairly quickly after the deal is under contract, because there usually isn't anything that is going to pop up that would make my client abort the purchase.  In commercial deals, it varies, but we usually do it after the inspection period is over but prior to closing.