LImited liability company vs owner name

[Fadel Shamm]

My agent is suggesting to establish a LLC as I am growing my portfolio to have more rental properties, I want to hear your opinion, what are the pros and cons of LLC?

Do you transfer houses ownership to the LLC? Can you get Mortgage under the LLC umbrella? And how exactly does it protect your assets?

[Russ Draper]

Quick answers (my opinion):

• Yes form a LLC! Use one of those online form places like legalzoom or formacorp to do it if you have to! Do not do this without a LLC!
• LLC protects you in case someone sues you, limits your liability. Otherwise if they win a lawsuit they can come after not only the property but everything else you own.
• LLC will have no history, so bank will not lend to a new LLC. Mortgage goes in your name, then typically a quitclaim is filed to give the property to the LLC. you are still responsible for the mortgage but now the LLC gives you protection at least

[Michael Evans]

Put each property into its own Land Trust with the LLC as the beneficiary. You can also use another LLC or S corp to do equity stripping and property management. Do research onthese terms.

Stay Blessed!

[Robert Gilstrap]

An LLC, corporation or partnership are legally recognized entities so the state treats them as a fictitious "person" in the eyes of the law so if the LLC owns it then your personal liability is limited to your investment in the LLC if everything goes overboard.

@Michael Evans is spot on with how to hold title but you need to understand what you are doing first so get educated a little and don't let worrying about trusts or LLC's stop you from buying!

Lots of lenders out there who will loan to an LLC but few traditional lenders ever would.

No clue what @Account Closed is talking about jail?! If you buy in your name and transfer to an LLC later you will not go to jail nor will the loan be called due. Equity stripping is way more advanced than you need right now but can certainly be done legally.

[Michael Evans]

@Account Closed What have you experienced that would make you say that about  the loan being called?  Has it happened to you? Have you worked for a loan company that called loans because the title was transferred?

[Robert Gilstrap]

I suppose anything is possible but in 24 years of investing (15+ using LLC's and trusts) I've never had one called, don't know of anyone else who has had one called and have never heard of anyone having one called. So I suppose in theory it could happen but it just doesn't. Everybody always has a story about one that happened but when pressed for actual details it's always I heard from someone who heard from someone...

Equity stripping is completely legal; perhaps you are thinking of equity skimming which is fraudulent.

Stripping equity is simply having enough loans on a property that no equity exists. The theory being that an attorney who does an asset search sees no equity exists therefore avoiding a lawsuit since there is nothing to take. The most common approach is to place an equity line on a property. You don't necessarily have to utilize the line however the property is encumbered by the full line amount even if not utilized.   

[Michael Evans]

@Account Closed thanks for the information.

Stay Blessed!

[Robert Gilstrap]

@Account Closed seems like we've had this discussion before on another post... 

The article you mention is funny because whoever wrote it doesn't even understand the fraud they are attempting to explain. The first sentence in the article equates equity stripping to equity skimming which they are not. I've already described what equity stripping is and it's 100% legal and doesn't involve any kind of fraud. 

[Lydia Lee]

Put each property into its own Land Trust with the LLC as the beneficiary. You can also use another LLC or S corp to do equity stripping and property management.

I think it sounds like a great ideal!