Should I purchase Real Estate under a LLC or my Name?

Question

Me and my Girlfriend are looking for our first property to purchase and we plan to use the BRRRR strategy. We have been weighing the pros and cons about using a LLC versus our Names, and we just can't come to a conclusion? What do you guys think?

I have also been doing my own research and I’ve read that acquiring funds for my first real estate investment under a LLC can be harder… I have also read the exact opposite. If there’s anyone who has experience in starting a LLC and Real Estate investment company I would love to hear your story and thoughts. Thank you!

Ray Rivera · Answer

Hi Aidan,Full disclaimer- I am not a tax advisor nor an attorney. With that out of the way, I personally acquire my properties in an LLC. Others may purchase them under a Trust (another conversation). The LLC provides you a layer of protection and therefore some mitigated liability. You can acquire several properties under one LLC, or open individual LLC's for each property. It all depends on your risk tolerance and personal preference. As you stated, acquiring a property in an LLC does require some extra leg work. You may need to utilize a HML (Hard Money Lender) or PML (Private Mine Lender) to fix said property. You can also find lenders who will loan to your LLC but as a Commercial Lender. This does mean you will have a Commercial Loan and therefore it will be with higher interest and a whole different set of requirement. Do be aware that every lender may vary slightly (or drastically) on what they require. Some lenders will do a 80% LTV while others only 70%. Some will offer a 6% interest while others will hover close to 7% or 8%. These terms can and will vary based on experience, credit score, liquidity/reserves and of course, the deal/numbers.In short, I have and will continue to acquire all my properties under an LLC. Although I like to think I do things right for the tenant/end buyer (fix & flips)- I don't care to take on more risk than necessary.Note: Starting an LLC is not difficult. For my first time I hired an attorney, paid the several hundreds of dollars and learned how to correctly have a legitimate business that's recognized by our state SCC (State Corporate Commission). From there, I've opened several ones on my end following the same practices.

Good luck!

H. Jack Miller · Answer

LLC is the way to go