All Forum Posts by: Thomas Franklin

@Jason V. In my opinion, Option 1 you presented is a risk because as you acquire more properties, in your personal name, a tenant can come after you, for everything.

For Option 2, setting up and maintaining a LLC is not difficult. It all depends, on your skill sets. I am not familiar with New York Law. There should be a website such as A Division Of Corporations where you can apply and create Articles of Incorporation. You will then need to get an EIN (Employer Identification Number), from the IRS. The most important thing regarding a LLC is creating a Real Estate Specific Operating Agreement. I would encourage you to utilize a Real Estate Attorney, for this purpose.

Yes, if you do everything through a LLC, you may loose the ability to use conventional funding; however, small Community Banks may be willing, to work with you as a Small Business Owner and possibly offer you conventional funding. Community Banks are small, hungry, and have a vested interest, in the communities they serve. There are loans called Non Recourse Loans where no personal guarantee is required. The LLC is on the hook and not you personally. Typically, a lender will request several months of all your banks accounts, (personal and corporate) and any Investment Accounts you have such as IRAs, stocks, Mutual Funds, etc. as well as W-2s and other income statements.

If you have capital, you can make a personal loan, to your LLC, to open a Corporate Bank Account. To open such a Bank Account, you will need to take your Articles of Incorporation and IRS Letter containing your EIN, to the bank. You can also request a Debit Card, in the name of the LLC.

Every state has different tax laws and such effects amount of tax exposure, liability, etc. You should consult an Investor Friendly CPA to find out the specifics regarding New York Tax Laws.

I would propose that you consult, with the right professionals, to learn and understand what would work best given your personal situation, your Investment Objectives, and the nuances of New York.

Regards,

Thomas

@Jason V. All Investment Properties should be in the name of a LLC, for the purpose of Personal Asset Protection. If you take title, to the property, personally and a tenant decides to sue you, they can come after you, for everything you own. Whereas if you have only one property in a LLC and a tenant sues you, he/ can only sue you, for an amount equal to the property's value.

Given what I have stated above the number of units does not matter. You will be offered Commercial Terms even if the property was a Duplex because you are closing in a LLC. I have found this to be true time and time again.

Let's say you want to be clever and outsmart the bank to receive a Residental Loan and then Quit Claim the property to a LLC or do a Land Contract naming a LLC as the beneficiary. You would be gambling big time! If the lender discovers there has been a title transfer, the lender has the right to initiate the "acceleration clause" or "due on sale clause" demanding full payment, of the note, within "x" number of days. The "acceleration clause" or "due on sale clause" is contained, in every Bank Promissory Note. This is a fact of life, in today's Mortgage Industry. A small Community Bank or Credit Union may be willing to work with you, but do not be surprised, if they tell you the same thing. The only legal way around this is to use Seller Financing assuming the seller would consider this option.

I hope the above information helps you.

@Andrea Vanias Welcome to the community, of BiggerPockets! The people here have a vast amount of knowledge and are more than willing to share their experience and provide sound insigh and advice. I am located, in Miami. I am a Rehabber as well as a Buy and Hold Investor. Please free to reach out to me, if you feel I may be of assistance, to your Real Estate Endeavors. 

@Brandon Coutts In my opinion and experience, one should have all Investment Properties in one or more LLCs. Doing so provides you Asset Protection, in the event a tenant sues you. You have an Umbrella LLC and a Clone LLC, for each Investment Property. A lender will offer you Commercial Lending Terms, for a Residential Multifamily Property. If you are simultaneously considering multiple properties, you may want to look into a Blanket Loan and compare this product, to other options. I agree with @James Petro that Community Banks would be your best starting point because these institutions will offer better terms because they want to build relationships, with Community Businesses, and they have a vested interest, in their community.  

@Kirshner Baptiste I am happy you found the information I provided, to be beneficial for your stated objectives. 

@Kirshner Baptiste Try the website http://www.miami-dadeclerk.com . Here you can search, for Tax Liens, Foreclosures, Probate, etc. From my understanding, buying Tax Liens are done through an auction. It is important that you perform the necessary due diligence. Working with a Title Company will be useful, to learn if there are any additional judgements against the property and delinquent accounts such as unpaid utilities, HOA Fees, etc.

@Johanna Serna I am happy, to provide any guidance I can to help you. 

@Johanna S. You and your family can continue to live, in one of the Multifamily Units, after the first year. This will give you time to pay down your Credit Card Debt, strengthen your FICO, build your Capital Reserves, etc. When you feel the time is right, you can begin your search, for a house, for you and your family. 

@Jesse Vipond Welcome to BiggerPockets! Congratulations, on your two Multifamily Investment Acquisitions, in such a short period of time. This website is full of people with Real Estate Experience having a wealth of knowledge, so do not hesitate to reach out and post a question in one of the forums. 

@Johanna S. Thank you, for expanding your personal details. You can sell your home, pay off your existing mortgage, and use the avails, to purchase a Duplrx, Tri Plex, or Quad. Because four units and less qualify, for residential financing, you can use a FHA Loan to acquire the Multifamily Property. As I stated before, you and your family can live in one of the units and the rental income paid, by the other tenants, will pay the monthly mortgage and other property expenses, provide you additional income, and help you pay down your credit card debt. To use FHA Financing, on four units or less, requires the owner to reside, at the property, for a minimum of one year as their primary residence.