All Forum Posts by: Stephen Rager

Late to the party, but you can definitely get a 30 yr fixed mortgage with a private lender with the borrowing entity as an LLC. Most rates are mid 5's so you're paying a premium. Most banks are still at a 5 or 10 fix over 20/25 years.

@Stephen Rager

Yeah... I'm not entirely understanding what you are saying... "Transferring to cash out" has nothing to do with having separate LLC.

The purpose of the LLC is to limit liability, right? Anything owned by the LLC should be under its "corporate veil" and with strong inside and outside charging order protections it becomes its own "island." Similar to how if somebody files a lawsuit against me, there should be no reason why the suitor should be able to go after your assets (since we are two basically complete strangers with no business entanglements).

You generally want to purchase your short and long term properties/investments separately to isolate the liabilities. Each type of investment carries its own set of liabilities, and each property carries with it its own liabilities as well. By keeping each "type" in its own LLC, you compartmentalize your exposure. For example, flips can be considered to have a high risk of liability due to all the construction/rehab occurring. Its more likely for a working to get injured on the job than a long term rental where you just generally have tenants living there. If both are owned by the LLC, the long term rental is effectively being constantly exposed to the risk of the flip.

That's my really short attempt to explain in written words.  From your posts, you are very focused on the "cashing out" part and just transferring assets around.  The more you transfer, the more you complicate Title in my layman's opinion.  The more you transfer, the more you actually "spread" the liability around in my layman's opinion.

You really should discuss with some qualified professionals.  Direct message if you want to chat

@Peter Hoang

I post on this constantly...

My layman's opinion is do not buy personally then transfer to LLC. Other than the due on sale clause and Title insurnace isssues... your lender doesn't care about your corporate veil.. they just want to sell you a loan. really nobody cares about your veil other than you and hopefully your qualified attorney..

Co-mingling funds is an "instant death" to your corporate veil. So, if at the end of the day your LLC has Title but you have the mortgage, who makes the mortgage payments? You or your LLC? Who takes the deduction — don't care about federal irs position on disregarded entities since LLC's are State entities subject to a State law regarding their veils...

You want limited liability protection afforded by the LLC? You realize the LLC has to own the asset with the liability. Well, a mortgage is a liability....

Using your LLC as a alter-ego is another no-no. So, let's look at this with two complete strangers doing this deal. So, you think it's normal for say you to deed to me (or even my LLC if it makes you feel better) one of your properties... most people would expect me to make the mortgage payments (on YOUR mortgage)... look for tenants and rent out the property... pay all the expenses and buy property insurance... and hand over all the remaining rent... all of this without any paper signed between us... hmmmm.... oh, when it comes time to sell you get all the profits... hmmm...

No one has yet rebutted me.. I wish somebody would.. nobody has shared a court battle, regardless of whether their veil was deem secure or not... I know it's complicated for one because it's state specific and the legalities depend on your circumstances (eg I personally see this being "okay" if after many years you need to "convert" to a LLC structure, but then afterwards showed you only purchased via your LLC).

None of anything is fool proof. But, why go through the effort and expense to create a weak defense? If you want the asset /liability protection of the LLC, purchasing it upfront and using commercial financing is just part of the costs for it.

If you want to chat about, I’d be happy to. Feel free to direct message me.

@Stephen Rager

https://www.biggerpockets.com/...

So, if I understand you correctly, you are trying to avoid what I posted on in the above link?

Given that you are investing with non-spousal partners, you kinda need the legal entity to be able to cleanly split up the profits/losses.  But, if you are good with the 50/50 split and not having the additional limited liability protection and legal arrangements of the entity, then I agree with the above comments of just doing it in your personal names?

If you don't want to pay, ie via the lending terms, for the entity but aren't really using it, don't use it....

Another bp poster recommended CoreVest Finance, Lima One Capital, and Visio Lending for obtaining 30yr term commercial loans.  I've never used them.  They appear to be national realestate specific lending firms.

Good luck.

P.S.  You are keeping your short term and long term assets in different entities, right?

Thank you for the information, I'll check with those lending institutions.  I hadn't thought to keep the long term and short term entities in separate enties that I do with this partner. I don't see why we can't create a second holding LLC to transfer them to before cashing them out for an agreed upon value. Than cash them out, because we are still both benefiting the same. Let me know if I'm looking at that wrong please.

Why do you need an LLC in the first place? Why not shut do it all in your personal names, as owners and borrowers?