Should I buy the property in my name or under LLC if its a BRRRR

[Haishan Peiris]

I am looking to purchase a property to BRRRR (Buy, Rehab, Rent, Refinance, Repeat). Should I purchase it in my name or in the LLC name?

[Carl Hebert]

Originally posted by @DeJarian Dickson Graham:

If you don’t mind me asking which bank. 

Mechanics Savings Bank - They let me refinance all my traditional mortgages that were in my personal name into one large mortgage in my LLC's name. Bonus was that a couple of months later my personal credit score jumped up 40 points!

[DeJarian Dickson Graham]

Wow that’s great!!! Thanks for the info. Originally posted by @Carl Hebert:

Originally posted by @DeJarian Dickson Graham:

If you don’t mind me asking which bank. 

Mechanics Savings Bank - They let me refinance all my traditional mortgages that were in my personal name into one large mortgage in my LLC's name. Bonus was that a couple of months later my personal credit score jumped up 40 points!

[Matthew Cannan]

Hey guys,

Thanks for the posts. my wife and I are brand new to Real Estate. We just bought our first personal house and decided it would be good to form an LLC in order to begin our investing journey.

We formed an LLC and do not have the best credit nor savings. Knowing we are not positioned the best to begin real estate investing, we plan to use the BRRRR strategy.

When we find a good deal for us, we plan to use hard money for the Loan to Cost and then a private money lender to cover the upfront costs and then structure the deal so the private money lender comes out on top through payments from the cash flowing property. Is this something anybody has seen done? The reason I ask is because I had heard about hard money but thought I wouldn't be able to front the cash for the projects and + the loan costs + property holding costs, which is where I would get a private money lender to fill in the gaps and get paid on the back end. Does this make sense to you seasoned BRRRRs who maybe started out in a similar situation?

With Aloha, 

Matthew C.

[Rachelle Bisaillon]

This is a great point and the same thing applies as any type of business Single Member LLC. My understanding is you can add a "shareholder" of 5% to re enforce the inability to pierce the veil even if this means giving a 5 % share paid out to a family member, at least that's what my attorney said.

[Cal Dunagan]

@Haishan Peiris

As a number of people in the thread have already stated, an LLC is absolutely the right move. You should read up on how they can benefit your real estate investment ventures. There are a ton of great articles on BP, including this one about the basics. Also, you should consider a Series LLC if you plan on multiple investment properties. There are a number of different things you should consider when deciding how to protect your investments. For instance, different types of LLCs have differing tax structures.

[Michael Goltz]

Appreciate the informative discussion on LLCs.

Since I have been considering forming a LLC I found this information extremely beneficial.

[NA NA]

My wife and I are also new to real estate investing and are forming a 2 owner LLC for our business. Our first home will ideally be a 3 or 4 unit property which we will also live in (house hacking) then get a loan against it in a year to obtain more properties. Any suggestions? Is this a good plan?

[Dave Alessandria]

I know a lot of people seem to like to acquire the property in their name for the ability to get a personal loan, then quit-claim it to their LLC. The fee/tax on the quit claim varies wildly depending on your area, but are there other considerations that need to taken before doing this? Are there legal/tax/loan issues with doing something like that in addition to that initial transfer fee?

[Jon Shoop]

This has been a very informative post! Thank you to everyone who has contributed.

[Mike Hoover]

LLC vs. Personal name: I definitely can relate with all our fellow BP-ers suggesting an LLC as the best path and mainly for protection (disclosure: all my current properties are in LLCs). However, this is not a black or white question and there are many factors to consider like personal wealth, affordability, risk tolerance, how long you plan your 1st BRRRR to take and how much cash you have to get started.

When I was in my 20s (broke) and getting started, it was all about the numbers. You will get the best interest rates under your personal name (assuming good credit and income) and have options to minimize your down payment. Additionally, you can get a 30-yr conventional loan under 3% currently (that is an insanely great rate!) with a minimal down payment vs. a 15-yr amortized loan where the interest is subject to change every 5-yrs. As a new investor, the bank will likely require 30% down with an LLC. You also need to be realistic on how long you think it's going to take you to do your first BRRRR.

I would suggest talking to many of your local banks and see what options you would qualify for. In some cases, a conventional loan may be the only affordable option for you. If it is a matter of staying on the sidelines (LLC) vs. getting started right away (personal name), I am rolling my sleeves up and taking the risk. You can always create an LLC down the road, transfer the property once you build confidence in the process and know that the last "R" in the BRRRR is for you.

Just my two cents.   Best of luck to you.