Very new, looking at income property in central PA

[Matthew Heffernan]

Hello! 

So, I'll start off by warning you that I am a complete Newbie.

My name is Matt.  I am not familiar with the RE industry, but my wife became a Realtor 1 year ago and has learned quite a lot and built a good base (local) network .  We are both in our mid-30's.

Through her home office, we have discovered an opportunity to purchase a 3-unit rental and are scrambling to figure out if it's something we should do for cash flow and long-term investment.

Even though she has some good experience working with banks, it has become somewhat frustrating to get straight answers on financing.  We have some specific needs considering we had not been planning this out for months/years.

Total annual cash flow is $25k. Total value around 150k

Overall, we feel like it is relatively low risk, with 2 units already leased with "good" tenants and a 3rd unit that we can fill with our own vetted tenant.

1.  Set up an LLC or not? I started out leaning toward LLC 100% and would not consider doing this without it, simply for fear of "liability" concerns. Now after reading some material here and hearing subjective input from other networks, it seems that maybe the LLC is not so critical in our scenario.

2.  Using zero-down financing with current home as collateral (if going LLC route) OR residential loan with current equity as down payment (resulting in 3 loans, including our current home, but much better terms and cash flow)?

Thank you for any input you have!

-Matt

[Dennis Walter]

Matt
Welcome to BP
1) LLC is probably not important for you at the time being from all that I have gathered. You can get insurance and an umbrella policy instead to provide you with protection. But this is better to be answered by someone with more expertise and maybe you should consult a good CPA with real estate investment knowledge and experience.
2) This also depends on your situation. I would lean towards the second choice of better terms and better cash flow. Remember that loans are not bad and it's good debt if they pay for themselves by resulting in positive cash flow from the investment.