First Time Investors

[Tim McKinnon]

Hi Everyone, My wife and I are looking to begin our real estate adventure over the next few months in multi family homes . One thing I keep wondering about is if we should for an LLC or a corporation of some sort to protect our personal assets. I know we can’t get a mortgage through the company initially but I was wondering if we could buy it on our own and transfer it to whatever company we start up, if we start one up. Moral of the story looking for advice on if we should set up an LLC or something similar? Additionally how do you transfer your properties to the company once you purchase the properties? Thank you for any insight! Tim

[Scott Schultz]

@Tim McKinnon LLC Formation in WI is quite simple, start here https://www.wdfi.org/apps/CorpFormation/

If you dont live in WI you will need a registered agent, and some municipalities regardless of the business entity will need a local contact for the property. 

you can get Commercial financing in your LLC name, thats generally not a problem, you sign a personal guarantee anyway. but the loan is usually 3,5 or 7 year term Ammed over or years.

Secondary Market Loans: FHA will require you to live in the property for year, some FNMA, FHLMC, VA, USDA, and WHEDA loans require residency as well. you can do secondary market "investor" loans they will require 20-25% down as well as reserves of 6 mo. payments and expenses in the bank and seasoned in addition to your down payment. they also look at your experience as a landlord.

Transferring to your LLC: It can trigger a Due on Sale, but in 99+% of cases it will not, as long as the lender keeps getting payments, I have never heard of a note being called due in this situation, many people use Sub2 as a way to finance investment properties, buying subject to existing financing and the transaction is arms length (to unrelated buyer) quit claims the deed and continues to make payments as if they were the seller (loan still in sellers name)

How to transfer: draft or have a title company Draft a Quit Claim Deed and record it in public records, that simple. 

*** what i described is Wisconsin Specific***