All Forum Posts by: Matthew Mucker

An LLC provides no tax benefits; the profit/loss of the LLC "flows through" to your personal income tax.

The LLC's financials are as private as your personal financials.

Here's the reason for forming an LLC: Let's say you own five properties, each worth $200K, in addition to $200K of personal property. Your tenant trips and falls at one of your properties and breaks her leg. She sues and wins damages of $2M. Since all the properties are your personal assets, you're forced to sell all of them (including your personal property) and give the proceeds to her.

Now, let's say you own each property under a separate LLC. The woman sues and wins a judgement of $2M. However, the LLC only has $200K worth of assets. That's the most she could get. Once the LLC's assets are liquidated, she can't go after any other assets. (Assuming you've worked with a lawyer to ensure you're operating your businesses properly to give you this protection.)

An LLC and an S Corp are very similar; the S Corp just has a few more requirements. Note that LLC's are a newer invention than Corporations and that there's less case law regarding LLC's. While LLC's were intended to be treated like corporations, you'd have to find out how judges in your area have ruled to determine whether to go with an LLC or a corporation.

But sole proprietorship exposes you to lawsuit city. You could lose not only your investments, but your personal property as well.

Buying has significant upfront costs. Selling a property costs even more (in the typical transaction in the US).

If someone is going to live in an area for only a year or two, then the closing costs to buy a house, the first 2 year's payments that almost all go to interest, then the closing costs and commissions to sell the property can quite easily make owning a money-losing proposition.

I'm new to the REI game and have been looking at some quadplexes just to get some experience doing the financial analysis.

However, I'm missing a key part of the equation: what are some of the more typical financing options for multifamily properties? What loan terms are common and how much higher is the interest rate than an owner occupied SFH?

With the subprime implosion, is it possible to get 100% financing on a quadplex if LTV is better than 80%?

I realize that these questions would be better answered by a mortgage broker, but at this point I'm just doing some basic research. Your input would be most appreciated.

-Matt

You can absolutely run a real estate investing business as a sole proprietorship. In that case, no real "set up" is necessary.

However, you'd face some massive personal liability issues if you did that.

Forming a corporation or a limited liability company would probably be the first step to protect your assets from your business' liabilities. Forming a corp or LLC is surprisingly easy. Visit your state's Secretary of State website for forms and instructions, and for the requirements for each business entity.

Here in Texas, all you have to do is fill out a form and pay $300 and you've got an LLC. I believe the story is very similar in most states.

After doing that, you'll want to consult with a lawyer to draw up an Operating Agreement and learn more about how to properly separate your finances from your business' finances to maintain the protection that an LLC or Corp would give you.

I'm looking for a referral to a lawyer in Texas (Tarrant or Dallas county) or other resources who can help my partners and me create an Operating Agreement for our LLC.

I'd like to buy a mutifamily (4plex) REO that needs work using hard money.

My question is, when I go to refinance, if LTV is below 80%, am I likely to be able to find a zero-down loan?

I emailed one mortgage broker who said no, I wouldn't be able to. I'd like to know more before I get into a situation that may require me to lay out more cash than I'd planned. I don't want to refi and have to put 10-20% down.

The property is in Ft. Worth, TX.

Hi, everyone! :lol:

It looks like there's a great community here and I'm glad I stumbled into it.

I've been considering getting into REI for a few years now but have decided that 2008 is the year to stop thinking/dreaming and start DOING! I just filed LLC articles with the state and am going to look at my first property tomorrow morning. I'm stoked!

My plan is to start out by flipping houses and my ultimate goal is to own a 100+ unit apartment complex for long term passive income.

If you're just interested in the current owner of the property, go to the county tax assessor's website and look it up. From that information you can then go to the county clerk's website to get more information.

At least, that's worked for me with properties in Tarrant county, Texas. I started at www.tad.org to get the current owner and the document number of the current deed. I then did a document search on the county clerk's website with that document number.

What a great thread idea!

My goal: to form an LLC with friends who want to partner with my in real estate investing and have an attorney draw up an operating agreement with us.

Once we have some skin in the game through these small upfront investments, we'll be motivated to go out and find a property to get our money back!

I have heard that it could be possible to get a loan in the name of the LLC with a personal guarantee. I'm curious to know the opinions of the group of that scenario. (It is something I'm likely to be investigating for myself soon.)