Logistics of 50/50 Partner LLC

[Account Closed]

Hey BP Community,

Disclaimer: I am not searching for tax/legal advice here, just looking for guidance and looking to learn how others have done this.

I am looking to buy and hold on a deal by deal basis with a partner (coworker of mine). We are looking to put 25% down (or 30% if required), which would be funded equally by the both of us with a medium term holding period (roughly 5 years). What are the logistics of actually purchasing like this? I was advised to use an LLC by a CPA, but was provided zero guidance on the actual steps and details regarding purchasing. To me, saying "use an LLC" means almost nothing because we already know that an LLC works the majority of the time. I am wondering if I was provided no guidance because this is not a CPA type of issue - maybe its an attorney type of issue?

To be more specific, the questions I am looking to have answered are along the lines of:

1) Do we obtain a mortgage in our own name, or LLC? (our lender was unsure of how lending to LLC works)

2) When making an offer on a property, is the offer in our names as individuals or in the LLC?

3) Should we even create the entity before purchasing, or do we purchase the property ourselves and transfer something (title, idk) into the entity?

4) Who holds the title - LLC, or us as individuals?

As you can probably see, a lot of my questions are around the idea of "who does blah blah blah - the LLC, or us as individuals in our own name(s)?" Basically, I want to be ready to put an offer on a deal the instant my partner and I deem that it is a good deal.

Thanks!

[James E.]

@Account Closed these are good questions, and know that the mechanics can get tricky especially during your first multifamily purchase. Here are my recommendations:

1) Do we obtain a mortgage in our own name, or LLC? (our lender was unsure of how lending to LLC works)

LLC, if your lender isn't sure of this then definitely look for a different lender. Regardless of relationships, you should get term sheets from at least 3 different banks / local credit unions.

You will likely have a personal guarantee on the loan (meaning you will have recourse if the LLC defaults on payments).

2) When making an offer on a property, is the offer in our names as individuals or in the LLC?

Doesn't really matter. My first deal I offered in my own name, now I offer with my holding company name. The key is to make sure you add "and/or assigns" after your name on your offer letter, and make sure that there is language in your P&S to allow you the right to assign your contract into an LLC or other entity before closing.

3) Should we even create the entity before purchasing, or do we purchase the property ourselves and transfer something (title, idk) into the entity?

Wait until you are 95% sure you're going to close before starting your LLC. So go through your financial due diligence, inspections etc.. before forming your LLC. It takes ~1 day to do, but no need to pay the fee and file the paperwork until you're a couple weeks out from the closing table. If the deal falls apart, at least you saved some money / headache by not setting up the LLC too early.

4) Who holds the title - LLC, or us as individuals?

LLC