LLC Benefits

because you cant buy real estate like this anymore unless you want 14% and 5 points (if you can get it).

You, gasp, actually have to be credit worthy now if you want to buy and hold.

Thank you for all the info on LLC. I'm new at this so i'm just doing a lot of reading while i'm healing from my surgery. When I do start, I hope I can count everyone for help.

Thanks,
Beverly

I am looking to do the same thing that you are planning to do...I have a 5 unit buiding in the Pocanos, PA that needs about 100,000 thousand worth of rehabbing before I can rent it out and start making money on the property....Let me know how it goes for you ....Looking into hard money as well hopefully I will not have to go that route....

Did you benefit from the advice that you gave and if so please let me know so that I can go in that direction as well....Just purchased a 5 unit building and I need to get about one hundred thousand to rehab and get it ready to rent....

I have 10 properties and I have none of them in an LLC...I just purchased a 5 unit building and it is in the LLC I am currently looking for financing to rehab the building to get it rented ...I would like to use other money besides my own lines of credit but it is looking as though I may have to do that but if you have anyone that is lending to and for Properties that are paid for and need to be refinanced and stay in the LLC please let me know.

That is correct it is called umbrella

From my experience you need the business to have been active for at least 2years before a bank will loan it money ..

Delaware is tax free

Good Advice . I own 10 properties and just purchased a 5 unnit building that has a laundry on the first floor and four units above as well as a 2 car garage in the rear ...but it all needs about one hundred thousand to get it all up and running let me know if you have any suggestions as far as getting money to finance this situation...I am not looking forward to using my lines of credit but I will if I have to because in the end it looks like a minimum of at least one thousand a month profit without the laundry income....

im in the same situation and had the same ?

If you wholesale a property is the amount you mark up the assignment considered income or what?

I think it's different depending on who you talk to. My accountant believes an unbrella policy will work best for me at this stage of investing. (fairly new with a few properties, cars, etc. $1Mil umbrella policy is under $300 where an LLC in CA is at least $800 per LLC per year. THIS IS IMPORTANT: An LLC is only good if you follow the states rules for operating an LLC such as regular meetings with minutes kept, etc. If you just pay the $800 and don't do anything else your LLC isn't worth the paper it is printed on and can be thrown out in court and become useless. Different states have different fees and rules. You can google the information for each state from their government websites. Speak with a good accountant who works with investors.

Best -

The best way to set up an LLC is to simply go to your sate website, for instance in Utah it is www.utah.gov and find the business online services section. They do a pretty good job walking you though the process of setting it up and you can also check the name availability to ensure that your desired name is still available. You can expect to wait 10-20 days to get the oficial documentati0on in the mail with your EIN (Employment Identification Number), so if your in a hurry it may be better to physically go to the local Department of Commerce, and that way you walk out with it in your hand.

Hope this helps,

Dave

so then you think LCC is not good if you are trying to start up and do assigns first, just to build some capital? I too am just starting out, and have come across some deals that i think are DEf woorth it. i want to try the "assign" technique first, and am trying to get all the pieces together i need to make my first deal.

any advice would be extremely helpful. thank you !

you should get legal advice from a REI REattorney

Since 96% of beginning REInvestor quit,dont waste your time or money UNTIL you have done a few deals and you know you are going to succeed in this business.

Jay Mitton is an attorney and the Father of Asset Protection...look him up

Limited Liability Companies (LLCs) are a very good vehicle in which own real estate, or for that matter, to deal with assignments for the following reasons:

1. Liability: Your maximum exposure is equal to your investment, no personal liability.
2. Ease of Use: You don't have to have hold and document annual meetings.
3. Flexibility: You can bring in investors and/or partners as members and split profits and tax benefits as you negotiate them.
4. Taxes: You don't get double taxed like a C corporation, the profit or loss flows to your personal return.

You can have a single member, single asset format, or you can set it up for multiple members and have many assets.

In my state, Utah, when you go to register your company name, they will draw up your Articles of Organization so you don't have to go to an attorney to draw them up.

Once you are registered, have your federal tax number, and opened your bank account, you are ready to go. All you need to do is make your offers in the name of your company instead of your own name.

Good luck!

The limited liability company has become a familiar entity for ownership of real property. So here is some good information I am passing on.

There are a number of good reasons to prefer the LLC as the entity for ownership of real property, and to prefer the S corporation as the entity for ownership of a business.

Of course, each business and ownership situation is different. But there is a clear trend and there are common fact situations that support the trend.

Here are the key reasons that the LLC is more appropriate than a corporation for the ownership of real property:

An LLC that has NOT elected to be taxed as a corporation is a partnership for federal tax purposes. The members (owners) in an LLC get both the benefit of protection from personal liability and the tax benefits of partnership tax law.

The LLC provides the protection from personal liability to all members (including managers of the LLC), like a corporation.

The general rule of “Do not hold real property in a corporation” does not apply to LLCs. While the sale of corporate property and liquidation of a corporation can generate two levels of tax on shareholders, the LLC taxed as a partnership exposes the owners to only one level of tax.

Partnership tax treatment does present accounting and tax challenges for an LLC, such as the deemed liquidation of the LLC in the event 50% or more of the ownership is transferred within a 12-month period. However, the passive investment nature of real estate allows for planning and thoughtful implementation of any change so that potential tax problems can be addressed.

Real estate is most often a straight-forward investment so that an interest in an LLC owning real estate is often attractive to other members and to outside investors.

Many real estate investments avoid the gross receipts tax, which does not apply until gross receipts hit $250,000, because gross receipts from the property are below that threshhold, except in the year of sale of the property.

Creditors of members of an LLC, like creditors of partners in a partnership cannot get at the assets of the LLC, and cannot step into the shoes of the member without complying with the steps required in the LLC Operating Agreement. Although under current law a creditor can foreclose on the interest of a member, the LLC law and operating agreement usually establish obstacles that limit the creditor to receiving only distributions from the LLC (if any), rather than effective membership.

A creditor who has a judgment against a member of an LLC cannot take over the LLC interest of the member even after foreclosure unless the operating agreement or a majority of the other members allows the creditor to do so, while the foreclosing creditor of a shareholder of a corporation can become a shareholder of the corporation.

The California LLC law allows flexibility in structuring an LLC to fit the management and ownership needs of the particular investors. In contrast, corporations have a set structure determined by the California Corporations Code, with little flexibility in ownership rights and management.

The members of an LLC in which the only activity is ownership and leasing of investment real property (rather than dealing in real estate as a business) are not subject to the self-employment tax. An LLC used for “trade or business” activities often subjects its members to self-employment tax.

When the real estate owned by an LLC that has NOT elected to be taxed as a corporation is sold, the tax treatment is that of liquidation of a partnership, with one level of tax on the partners, based on partnership tax law.

The LLC can be owned by members who are corporations, trusts, or any other type of person or entity, without disturbing the tax status of the LLC. In contrast, an S corporation can lose its status as a pass-through entity if any shares of stock in the S corporation are transferred to a corporation or other type of person or entity not permitted as an S corporation shareholder.

Randy Bailiff
Dean Graziosi Real Estate Coach

I am starting new relationships with a couple of private investors and am unsure of what kind of terms to accept or offer. I came up with 10 percent interest due on or before 6 months, interest only payments after 6 months, if needed. Any input would be greatly appreciated. Thanks

Thanks Mike, Randy and Brent for this concise info on LLCs, just what I was looking for. I have been doing deals for a couple years without an LLC, I think it is time for one.

Judi

I've heard a couple of views on having your name/middle as part of the LLC or corporation's name (i.e. Camat, LLC) both being good and bad. As I was listening to one of the interviews, I learned that if your LLC/Corp. screams "investor" (i.e. Webuyhouses,LLC), the bank will not lend you any money. On the other hand, one if the positives of not having your name in the LLC/Corp is that people have a lesser chance of finding you (if they decide to go after the LLC/Corp). Any thoughts?

(most) banks won't loan money to LLC'c anymore, regardless of whether your name is in it or not. If you want to borrow money against a property, you have to put it under your name...

Does anyone know a good real estate attorney in or near Newark, Delaware?
Thank you in advance

Hello Anita,

I know that I'm responding to your information from 2008, but I was wondering if you had any update information on how to make connection with the Dun & Bradstreet website?

good information, thanks

RBmasters.

What about registering an LLC in the beginning in order to establish credibility? Wouldn't this be feasible, especially if you're young and need to be taken seriously.

There are copmanies that will help you to establish your business credit and register you with all of the 6 business bureaus. Do you know of any in Colorado?

Hello, Although this post is old I know DG folks frequent all areas. In response to ths banks not giving a loan to an LLC. If your LLC is new with no established financial history well, it is likely that you won't get a loan . But, (and this is my opinion), The benefit of the a new LLC isn't just getting a bank loan. Your better option would be to get a Business line of credit. Which any LLC can do new/old and getting it doesn't depend on your credit score nor the financial standing of the LLC. In the Real Estate Biz we apply for either - 1. A full document loan. Which requires presentation of all of your records relating to the business you have established. 2. A No document loan. Which is as it states. It's always better in a LLC to have a partner (again my opinion) especially when apply for whatever type of monetary need. But a partner isn't required. It qualifies you for more money. As with any reference to LLC v/s personal loans. It is of exteme importance that you do not somehow intertwine the two. It is very easy to make that error. I see it all the time. So before venturing down the LLC road, if you haven't done so yet . It probably is a good idea to educate yourself the practices of LLC, INC,LLP to prevent cross documentation. Seek a resource for a business line of credit rather than a loan. Good luck

Wow! Lots of Q&A, and stuff here. About the time I was I was going to jump in about establishing history and credit in a business entity, Nate (and all you seasoned investors) came in-- phew.

Now go do deals Farley!

-Tina

We are here to help. I am glad that you have found so much from these posts. I am glad the information you and others have found great use of this information. Know that you can ask questions anytime and there are people that can truly answer the information for you.

I'm new to REI also - thanks for sharing the website and LLC info! Researching all of these issues with dial-up Internet is enormously time-consuming, and often virtually impossible. Your input is much appreciated!

Thanks!

Great Questions!!!
Anita Correct answers/talk more later.....