LLC and financing

[Jaksh H.]

Hi all, I a new investor just learning the art and science of real estate investing. After reading all the discussions on various forums on BP, I want to set up an LLC and buy a single family rental unit for buy and hold. The local bank I talked to, will consider this as a commercial loan, and it will be a 5 year balloon loan with with a 20 year amortization.

Do you think it is a good idea?

I was also curious, as to the functioning of LLC. If one cannot co mingle the funds between different LLCs and with personal assets, how is the real estate investing to be a source of passive income.

And What do I do with the income generated with the property in that LLC- after a sufficient amount has been saved as a reserve for repairs etc. I was hoping to use it to invest in future properties, held in different LLcs, but is it really possible/legal, without jeopardizing the sanctity of the LLC?

Thanks for the help

Jaksh

[Evan Manship]

@Jaksh H. 

Welcome to the wonderful world of real estate. I was in your shoes at one point so I know the pain and struggles of starting out -- I am just outgrowing the "starting out" phase myself.

If I were you, I would utilize a typical 30/30 mortgage. MB Financial has a $10,000 investment property minimum so you should be fine with whatever property given your income. Once closed, quit-claim deed the property to your LLC, provided that you are the sole principal of the LLC (about $150ish fee depending on the state) It would be worthwhile to call your bank and see if this can be done.

That way, you have your 30/30 mortgage, added protection, and building equity, credibility, and most importantly -- cash flow.

***Also, at any point in this thread, you can type the "@" sign followed by the first few letters of someone's name in this conversation that you'd like to mention. Directly underneath this box there will be a dropdown to choose from the person's name you are looking for. This is a direct mention and will let people better see when you are talking to them. It is the equivalent of tapping someone on the shoulder and speaking to them as opposed to shouting into a crowded party of folks.

Cheers,

Evan