Questions about creating an LLC for equity partnership

[Andrew Myers]

Hi BP community - Hope you can help!  I'm wrestling with these questions.  

I'm putting together an equity partnership to purchase a small multifamily property outside of my home state to buy and hold. I have partners/investors ready to go. 

My questions are:

1. In order to obtain commercial financing (~20/25% down), do I need to create an LLC first so we can be underwritten as a business (LLC) - and then get pre-approved to purchase. This sounds like a "blind fund" - but what's the alternative?

2. If yes to above, registering an LLC out of my home state should be done in the state where the LLC will do business. What address will I use in that other state (if I haven't found a property yet)?

3. Should the operating agreement be put together when the LLC is formed and before we search for properties, or that better for another point in the process.

Thank you all!!  And would love to connect with you.  

  

[Alina Trigub]

@Andrew Myers

These are all good questions, but ideally you would want to address them with attorney and accountant, or better yet, find a real estate tax attorney who can help you cover your case from multiple angles. 

So this is strictly my opinion and I'm not an attorney. If you're working with partners and/or especially investors, you should create LLC. Moreover, if some of your partners are passive investors, you may be entering securities territory. So discussing it with attorney is a must! Consider giving all partners active roles, if you want to keep it as JV, but again - attorney's advise is your best bet in this case.

The LLC that is buying the property must be registered in a state where the property is located. However, you may decide to create another LLC for yourself in a state of your choice that will be a partner in a property LLC. I probably sound like a broken record, but these are all attorney's questions.

Best!