Hard Money with LLC's

[Ignacio Quinonez]

Hey all,

I am super new and have been getting as educated as I can along with analyzing properties for the better part of a year now. I have recently found some great looking deals and have reached out to a hard money lender in order to figure out what the terms of the loan would be and better analyze properties.

After speaking with the lender, it seemed like an LLC is more of a requirement when looking to flip. Is this a requirement for most hard money lenders? I am currently in the panhandle of Florida (Niceville, Fort Walton Beach area) and I am looking for opportunities to invest locally primarily for Buy and Hold. When I do form the LLC, it will be here in Florida which brings me to my next point.

I've also been searching in Arizona. I have relatives there that are currently flipping property and also have been in the construction field for 25+ years. Flips will be primarily to build up capital for buy and holds. Would I be able to use an LLC formed in Florida for properties purchased in Arizona, or any other state for that matter?

Any feedback would be greatly appreciated.

Thanks,

Ignacio Quinonez

[James Masotti]

Originally posted by @Ignacio Quinonez:

Hey all,

I am super new and have been getting as educated as I can along with analyzing properties for the better part of a year now. I have recently found some great looking deals and have reached out to a hard money lender in order to figure out what the terms of the loan would be and better analyze properties.

After speaking with the lender, it seemed like an LLC is more of a requirement when looking to flip. Is this a requirement for most hard money lenders? I am currently in the panhandle of Florida (Niceville, Fort Walton Beach area) and I am looking for opportunities to invest locally primarily for Buy and Hold. When I do form the LLC, it will be here in Florida which brings me to my next point.

I've also been searching in Arizona. I have relatives there that are currently flipping property and also have been in the construction field for 25+ years. Flips will be primarily to build up capital for buy and holds. Would I be able to use an LLC formed in Florida for properties purchased in Arizona, or any other state for that matter?

Any feedback would be greatly appreciated.

Thanks,

Ignacio Quinonez

It doesn't matter what state the LLC is set up in. If you're doing cross border transactions you'll simply have to register with the state department as a foreign entity doing business. You'll still be subject to business taxes in the state where you are actively doing work, and potentially in your business's home state as well. More importantly though would be the fact that you'll want to have two LLC's set up. One for doing buy and hold and one for flips. This has nothing to do with the states in which you're operating but rather has to do with the way that income is handled by the IRS and therefore how it impacts your taxes.

With regards to your question about HML's only lending to LLC's that has to do with federal and state mortgage protections laws. Those laws only apply to consumers...aka people...not corporations. There are regulations that would make it very difficult for an HML to lend to an individual rather than a corporation. So rather than dealing with all the bureaucratic mess of lending to an individual they just limit it to corporations.