All Forum Posts by: Matt Nico

@Matt Nico I've been looking for a specific response like this for sometime from an investor. I've talked to CPAs and they are all about the protection of LLC. I've also wondered how you transition from personal to LLC with 2 years of history so a loan can be obtained. Perfect! Thank you!

Alex,

Yeah the LLC protection is great but an Umbrella Policy accomplishes the same thing. My advice is to just use your own name for a while first. Once you actually have equity in a handful of properties or something to lose, then go for the umbrella policy and start putting homes into your LLC.

From what I have been told by financial people who know better than myself, LLC's need 2 years of tax returns to be able to really get loans and lines of credit, but some places give it to you after 1 year. I'm actually in that process now.

Happy Housing,

Matt

0 Votes

@Misti DelMar

You get used to the large sums of money after a while!!!! Fake it til you make it ;)

-Matt

0 Votes

Originally posted by @Joe Splitrock:

@Sean Delagrange generally speaking if you have the loan in your name, moving to an LLC doesn't accomplish much of anything. If anything it gives you a false sense of security. Most investors starting out, holding the loan in their own name and self managing, are piercing the corporate vail and can easily be held personally liable. Make sure you hold good liability insurance that names you and your LLC.

As far as an LLC, here are some thoughts:

1. Make sure XYZ has no connection to your name. Don't use your last name or your initials. The purpose of an LLC is liability protection not ego stroking. You want yourself separated from the business so using your name connects you for no benefit.

2. Pick something generic like Oak Street Properties. If I did a Google search on Oak Street Properties, millions of results will be returned. Compare that to Atroosty Properties, which would return one result if I named an LLC that. The point is you want anonymity, which means you want to harder to find, not easier to find.

3. Your LLC name doesn't need to be your company name. You can have a DBA (doing business as) which is your company name and you can hold multiple LLC with different names. In fact I would argue your LLC should not be your company name when it comes to rental properties. If you scale, you will want multiple LLC, so locking your company name to a specific LLC doesn't make sense.

4. Banks don't care what your LLC is called. All they care about is your financial history of the LLC. Since the loan is in your personal name, the LLC will be creating no financial history.

5. Hold the LLC with a law firm that will mask your personal address. In some states, LLC owners and addresses are public record. This can actually make it EASIER for tenants to find your home, assuming you used your personal address for the LLC address. You can have a law firm hold the record at their address.

6. I would say @Matt Nico and the Rookie podcast are working off old information. It was true in the past with Fannie Mae and Freddie Mac backed loans, that you could not transfer to an LLC. Both of these mortgages can now be transferred due to rule changes over the last few years. Check your mortgage before you do it, but unless the mortgage is 5+ years old, I wouldn't be concerned.

Joe you put things into words much better than I ever can...haha. Your explanations are great.

I was not aware of rule changes for Freddie/Fannie loans. But the same concept would hold true...what would be the point of transferring over? Why even give the bank an option to be able to exercise the due on sale clause? An umbrella policy should solve any problem of liability.

2 Votes

Originally posted by @Sean Delagrange:

@Matt Nico they have 2 properties each, lol. So maybe they are costing themselves money?

And if I purchase the property in my name with favorable terms, then move to an LLC, those favorable terms might not stick? Sorry for the questions, appreciate the help. Seems like I need to read up on it. Luckily the close date isn't until July.

Sean,

They could be costing a lot of money yes. Let me answer it better:

When you put properties into your own name, you get an advantage of lower interest rates and better terms. So if you buy a property under your own name with a conventional loan right now, you would be able to get around a 2.5%-3% rate and 5% down payment depending on your credit. If you buy a property under an LLC right now, you are looking at a 4.5%-5.5% rate with 20% down. That 2%-3% difference is hundreds of dollars a MONTH that you dont get to keep, plus the extra down payment.

So while you are a small rental property investor, take advantage of the low rates and low down payments while you can!!!! I'm at 5 properties right now and they are all under 3.25% interest rate and in my own name. Soon, I will have to transition to 5% with my LLC, but I want as many low-rate loans as possible.

The LLC can be created now if you want. For reference, I created mine when I bought my 4th property. The way it would structure is when you do your taxes, you run the income you are making through your rentals through the LLC even though the LLC does not own them. This will give your LLC time to establish so when you need to borrow money and possibly get a company vehicle or credit cards, your LLC has 2 years of history.

I hope this better clarifies. I would find a good CPA and talk to them about this. Maybe in your state this wont work. As a reference, I am located in Florida. Feel free to respond to this with any questions or PM me in the future.

-Matt

14 Votes

Originally posted by @Sean Delagrange:

@Matt Nico interesting, this is the first I have heard of this. Thanks for pointing it out. Do you have a specific real estate rookie show you can point to that talks about this topic and how to avoid that clause? I would love to give it a listen very soon. I know multiple people who have their property in an LLC, so I wonder what they did to avoid it.

Sean,

I am not sure of the exact show, but I know a couple of the most recent shows talked about the LLC thing. I'd start there.

Those "Multiple People" who you are referring to that you know are either costing themselves money by buying properties in an LLC that they dont need (to start out), or they are much larger of a business than you, and need the LLC to put properties in because banks usually cut you off around 10 properties under your own name. To be perfectly blunt (sorry I'm a very direct person), you have not earned the right to have the same problems as the other people you know.

You have 1/10 properties in your own name.... Once you get to 5-6, then worry about it...haha.

6 Votes

Hey BP social media guru's........

Forewarning: Like other investors, I'm an introvert. I don't usually like talking to people. I keep to myself and mind my own business.

With that being said, I am fully aware of the impacts that social media has on life and to be more specific, an investor's journey to real estate..... I want to be a master in the social media world. I have a handful of rentals already but I want to turbo-charge what people see. People always ask how I did certain things in my rentals such as custom light fixtures and refinished furniture. I want to give back a little to show how certain things I do are done.

Can anyone give actionable tips for an introverted person like myself to begin a social media onslaught?

I would love it if people better than myself can share with me their own strategies for social media when it comes to before/after photos of rehabbing, time-lapse videos of project renovations, and the marketing of yourself. And also any recommendations for any video or photo equipment that I could possibly buy at a reasonable price to create a visual work of art on Social media.

Thanks and Happy Housing,

-Matt

1 Vote

Originally posted by @Sean Delagrange:

Hey Everyone,

Quick question I'd love some advice on. Just bought my first rental property and I'm going to form an LLC and move it over to that ownership. The goal is to purchase more properties over the years mainly as income/cash flow producing investments, with the occasional flip down the road as well.

My question is around the suffix before the "LLC" in the company name. I've seen posts on here about this, but I'm curious what the consensus favorites are (and if there are any that are not advisable or that raise red flags - that will be very helpful). I've seen some people say not to use "investments" or "properties" for fear of lenders not dishing out loans, but I've had really no problem so far and I've been up front that I'm purchasing as an investment property. Would an LLC change that?

Here’s what I’m choosing between, in no particular order. We’ll use XYZ as the placeholder before the suffix.

XYZ Properties, LLC

XYZ Capital, LLC

XYZ Real Estate, LLC

XYZ Homes, LLC

XYZ Investments, LLC

XYZ Holdings, LLC

XYZ Assets, LLC

XYZ Property Group, LLC

XYZ Equities, LLC

XYZ Ventures, LLC

What are your thoughts? I really think “Capital” is clean and sharp, but does it make sense here? I like the others too, but assuredly not every option will be available when I file so I’m just trying to narrow it down.

Thanks in advance!

Sean,

You do not need an LLC with 1 property. If you'd like to create it go for it, but I would absolutely NOT move the property into the LLC. It could trigger a due on sale clause. If you are worried about liability with the home being in your name, don't be (yet). When you are a small organization you usually don't have anything worth taking. Continue to put properties in your own name as this gives you the best interest rate and terms. As you grow I would look into an "Umbrella Policy" which actually protects you just as well if not better. Listen to the real estate rookie shows. They talk a good amount on this subject.

Also for your LLC name, here are thoughts:

1. If you are planning on going to be a full time real estate investor now, start telling people what you are doing and think of a good name. As an example, mine has "Estates" on the end. People love it.

2. If you do create one, I created a branded logo and named my LLC. I have T-shirts, Business cards, and my truck is a very specific color which everyone knows me by. To everyone who know me, I am "The guy who knows real estate"

Hope this helps,

Matt

17 Votes

Originally posted by @Misti DelMar:

Hello!

I am looking at creative ways into getting my first real estate deal.

I found a duplex that is offering seller financing and the whole place is gutted basically, other than the walls. So it needs new kitchens, bathrooms, flooring, etc. It's the 'worst building' on a nice street in a growing area. I'm trying to run numbers for the first time to see if it's a good deal.

My questions:

* Is there a specific calculator tool I should use to calculate everything? Or a combo?

* Is there a service you can pay for that will run your numbers and options for you? (I'm scared of making a big mistake my first time).

* I would still need a loan on the remodel to get tenants in. Can I use the FHA 203k construction loan (if I lived in the other side)? Is there another type of construction loan I could get?

* Could I purchase this with someone else in a 'partnership', and they get one side's cash flow and I get the other? Or we split the equity on a refinance? Do people work out deals like that? I'm new I don't know what's possible.

Thanks for any help and guidance!

Hi Misti!!!

Running the analysis is usually pretty simple. Take principle, interest, taxes, and insurance and add them together to get your mortgage. You can do this by going online and typing in "Mortgage Calculator" or just getting an app on your phone. There are a lot of different versions. Add up the mortgage and then look on zillow or wherever you can to find what your duplex would rent for. If the mortgage is say $1,500 after everything and you can get $2,500 in rents, then you are making $1,000 a month on the duplex. That would be a great first deal.

For seller financing, if this is your first purchase you might want to just try for a regular mortgage. If you are familiar with seller financing, give the owner a call and ask what kind of terms he wants to get out of it. If the numbers work for you with his terms, then pull the trigger. If they dont work (happens a lot), I'm always honest with people and let them know that I have to make money too, and I give them the numbers that work for me.

Good luck!!!

Matt

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Originally posted by @Kyle J.:

@Matt Nico The way I found out is because I’ve had one of the Chase Ink business cards for over a decade and they’ve never reported to my personal credit report. :)

I think the starting credit limit they gave me was $20k, which isn’t too bad I guess for a business that had no history at the time. (I didn’t ask for any particular amount. That’s just what they gave me at the time, so perhaps you could get even more.)

One last benefit I forgot to mention is that you can get separate cards for any employees (or anyone really) that you may have who need to do any charging for you.

So if you have to send them to Home Depot or wherever, you don’t have to give them your card. They’ll have their own card that will have its own number so you can track where they used it and all the charges that they made.

Awesome. Thanks a lot for the information man. I am going to apply for it tomorrow as soon as the banks open up.

-Matt

0 Votes

Originally posted by @Kyle J.:

@Matt Nico I usually recommend the Chase Ink business cards. Another benefit of those that you didn't mention is, they also have cash back on all your purchases. Plus, they also don't report your balances on your personal credit report. So if you end up charging a lot on a rehab project or something and running up a fairly high balance one month of $10k-$20k or whatever, it won't have any effect on your DTI ratio if you happen to also be applying for a mortgage or something.

Kyle this is pure gold, thanks. How did you find out that they do not report the balance to the personal credit? I am about to be playing the credit card game of 0% APR so I will be maxing the card out for materials and holding it there for 6-9 months, so a non-reporting feature sounds too good to be true.

Did they offer you a high limit on your cards when you get them initially? I'm with BOA now and they absolutely suck for credit cards.

-Matt

1 Vote

All Forum Posts by: Matt Nico

Matt Nico has started 21 posts and replied 429 times.

Post: Company/LLC Name ideas

Post: Creative Seller Financing Options & Crunching Numbers

Post: Company/LLC Name ideas

Post: Company/LLC Name ideas

Post: Company/LLC Name ideas

Post: Social Media and the impact it has on your business

Post: Company/LLC Name ideas

Post: Creative Seller Financing Options & Crunching Numbers

Post: Best business credit cards!!!

Post: Best business credit cards!!!