Investor · Pekin, IN · Member since 2017 · 47 posts · 27 votes
6y
@Mitul Patel
Most investors don't have a lot of assets or net worth when they buy their first rental. When that's the case there is really no reason to form an entity for corporate protection. The only thing people without assets have to lose is their credit or freedom. Just don't do anything immoral, unethical, or illegal. A good liability policy is a must. But umbrellas maybe or maybe not depending upon your unique situation. Corporate protection can be penetrated by good lawyers for many reasons. One of them is the co-mingling of funds between personal and business accounts and other various accounting measures. LLCs can be a lawsuit deterrent but only because of ignorance of the law. I really don't like the way some cpas and lawyers try to sell entities as products to create more business for themselves. You don't have to have an LLC to get started. You may fail and decide that real estate investing isn't for you. If so you will have to pay a lawyer to dissolve the entity. I'm Not a lawyer just an investor. I encourage you to do a lot of research before creating an entity. You'll want to be sure to create the best entity for you. I would recommend talking to more than one lawyer and cpa.
You can't get a conventional loan in the name of an LLC.
You sure can. You can not get a conforming loan which many often confuse with conventional. Also the property needs to be investment only not primary residence.
Yes, there are many advantages to buying under your own name when you are starting. With only one property your liability is relatively limited (vice having 20 properties) and financing is easier since you can get a regular conventional loan (not necessarily a personal loan). In a nutshell, that would be an "easier" way to start until you learn more about this, then weave in a LLC when you are ready.
Investor · Pekin, IN · Member since 2017 · 47 posts · 27 votes
6y
@Mitul Patel
Most investors don't have a lot of assets or net worth when they buy their first rental. When that's the case there is really no reason to form an entity for corporate protection. The only thing people without assets have to lose is their credit or freedom. Just don't do anything immoral, unethical, or illegal. A good liability policy is a must. But umbrellas maybe or maybe not depending upon your unique situation. Corporate protection can be penetrated by good lawyers for many reasons. One of them is the co-mingling of funds between personal and business accounts and other various accounting measures. LLCs can be a lawsuit deterrent but only because of ignorance of the law. I really don't like the way some cpas and lawyers try to sell entities as products to create more business for themselves. You don't have to have an LLC to get started. You may fail and decide that real estate investing isn't for you. If so you will have to pay a lawyer to dissolve the entity. I'm Not a lawyer just an investor. I encourage you to do a lot of research before creating an entity. You'll want to be sure to create the best entity for you. I would recommend talking to more than one lawyer and cpa.
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
6y
@Mitul Patel First off congrats on landing your first deal here in the CT market and best of luck executing the BRRRR strategy.
Since you are buying cash there is really no right or wrong answer to this question. If you want the protection of a LLC and then want to take advantage of the best possible rate and terms on the back end refi you can always quit claim the property to your personal name down the road in order to do that. If you are trying to refi out as quick as possible odds are you will end up with some kind of commercial loan which then it will not matter if you have title in a LLC.