Real Estate investment

[bfmanhaes]

I'm new to the real estate business. I want to open a llc to protect my investments and start a business credit to buy rental properties. I know I don't have credit, personal or business. But I can buy a studio all cash to start. Would it help create collateral for future business loans? Even though, it will be a new business?

[BRBiz]

What you want to do is open up a Parent LLC and create a separate LLC's for each property that your going to hold.

 

What I would recommend trying if you have the cash find a property you want to buy and then go to a local bank or credit union and see about getting a mortage for the property under the business name and put down upwards of 75% of the money and finance the rest. Then build upon that relationship with that bank or credit union for future properties.

[bfmanhaes]

Thanks for the advice. I do work for cash and can not show a steady income. My last year income tax was the minimum. Do u think that a bank would finance to my new company without any proof of income? Also, I was thinking in buying REOs or go to a foreclosure auction.

[stroked89coupe]

There is no way a bank would lend to those standards. Tax returns would be a minimum. If you can pay cash for everything though there won't be any need to go through a bank.

[bfmanhaes]

I can pay cash for a condominium to start, but How am I gonna get credit to buy more later? To start, first step, I have it, but want to be able to get financed for the 2nd and beyond.

[BRBiz]

My point was for building credit for future properties that's the purpose of going though a bank and forming a relationship. Having no income makes it a little harder but not impossible. Usually you will have to PG a loan for a house even with great business credit and you usually put about 50% down. But after a handled up of properties you can get banks to do it based just on business credit. Another idea is basically the same but along with the downpayment put up cash as collateral on the balance that bank can hold on a CD. Seems silly to secure a secured loan but its a trick that works. You just need to find a bank that will work with you and these are often small local banks or credit unions. This could over come the no income issue and you may not even have to PG the loan.

 

Or you hit the auction scene and see what you can buy for cash and try to do it on a cash only basis.

[bfmanhaes]

Ok, now back in the parent llc and others llc for each hold is this really necessary in the beginning? The state taxes for each one can easily eat my cashflow or profits, specially If I will start small with condominium unit.

[BRBiz]

That is the prefered method but I hear you on the fee's..With one property you will be fine for now. You could always transfer the property to another LLC down the road if you wanted to.

 

Don't mind the errors in my last post my Ipad does what it wants some times!

Edited April 7, 2013 by Brndnh721

[bfmanhaes]

ok. thanks.

[BRBiz]

It's just a liability thing.. Your potentional for law suits is greatly increased when renting properties so you don't want to have all your assests under one company. Also its important to keep proper paper work for your company(s) in case any one tries to pierce the corporate veil. One thing that is also good to do is to have more then one member in each LLC. If your the only member/owner then this is why the parent company thing is important. Parent company doesn't hold any property but LLC 1 holds property LLC 2 holds property etc. In LLC 1 & 2 you would have your self and the parent LLC listed as members thus making it a multi member LLC. This is done for a extra layer of protection because there have been some cases that judges have taken away the corporate protection due to the LLC being one member. This is very rare and not likely to happen but it could. I have personally seen this type of set up work perfectly for corporate protection.

[bfmanhaes]

Thanks for the information. Very helpfull

[stroked89coupe]

For some reason in Georgia, LLC's can only have one member listed. I'm sure this differs from state to state.

[BRBiz]

A lot of other states are similar in terms of what's actually on state paper work but it really doesn't matter its all about your LLC or Corporate paper and why its important to keep proper paper work.

[bosshaug]

If you plan to buy/hold, then paying all cash is a good start--studios will limit the tenant or buyer market you are looking to attract.

However, going forward, if you want to build a rental portfolio,you will need to be bankable: (i.e. verifiable tax returns for the last 2 years, showing a good profit, plus strong personal credit). You can leverage hard money loans at 65-70% LTV, if you plan on doing a few short term flips to build more capital. Meanwhile work on developing your personal credit as well as your business credit profile with

Experian Business and D&B (you need to look professional, website/phone).

[BRBiz]

If you plan to buy/hold, then paying all cash is a good start--studios will limit the tenant or buyer market you are looking to attract.

However, going forward, if you want to build a rental portfolio,you will need to be bankable: (i.e. verifiable tax returns for the last 2 years, showing a good profit, plus strong personal credit). You can leverage hard money loans at 65-70% LTV, if you plan on doing a few short term flips to build more capital. Meanwhile work on developing your personal credit as well as your business credit profile with

Experian Business and D&B (you need to look professional, website/phone).

And also having even one property will help you obtain hard money loans since you won't be so much of a newbie.

 

There are a lot of tricks in real estate some work and some don't. And also where your looking to invest makes a difference.

[bfmanhaes]

Thanks for all replies guys. I pretend to buy and hold. The condo will be only a start. I got a partner who wants to buy something together to do a quick flip and have some cash for another property.

[stroked89coupe]

I wish you luck. This is always something I have been intrested in doing. Mainly rentals. Let us know how you turn out.

[GR8WhiTE]

What you want to do is open up a Parent LLC and create a separate LLC's for each property that your going to hold.

 

What I would recommend trying if you have the cash find a property you want to buy and then go to a local bank or credit union and see about getting a mortage for the property under the business name and put down upwards of 75% of the money and finance the rest. Then build upon that relationship with that bank or credit union for future properties.

great advice

[GR8WhiTE]

It's just a liability thing.. Your potentional for law suits is greatly increased when renting properties so you don't want to have all your assests under one company. Also its important to keep proper paper work for your company(s) in case any one tries to pierce the corporate veil. One thing that is also good to do is to have more then one member in each LLC. If your the only member/owner then this is why the parent company thing is important. Parent company doesn't hold any property but LLC 1 holds property LLC 2 holds property etc. In LLC 1 & 2 you would have your self and the parent LLC listed as members thus making it a multi member LLC. This is done for a extra layer of protection because there have been some cases that judges have taken away the corporate protection due to the LLC being one member. This is very rare and not likely to happen but it could. I have personally seen this type of set up work perfectly for corporate protection.

Aren't Land Trusts a good way to go BR?

[GR8WhiTE]

I wish you luck too. Everyone here is trying to make money. Bust that door open and let us know how everything is going for you. I to would like to get involved in rental properties. Some parts of the country have a good market for this. Let's just pray Dennis Rodman doesn't instigate WW3..hahahaha

[BRBiz]

 

It's just a liability thing.. Your potentional for law suits is greatly increased when renting properties so you don't want to have all your assests under one company. Also its important to keep proper paper work for your company(s) in case any one tries to pierce the corporate veil. One thing that is also good to do is to have more then one member in each LLC. If your the only member/owner then this is why the parent company thing is important. Parent company doesn't hold any property but LLC 1 holds property LLC 2 holds property etc. In LLC 1 & 2 you would have your self and the parent LLC listed as members thus making it a multi member LLC. This is done for a extra layer of protection because there have been some cases that judges have taken away the corporate protection due to the LLC being one member. This is very rare and not likely to happen but it could. I have personally seen this type of set up work perfectly for corporate protection.

Aren't Land Trusts a good way to go BR?

Yes you could use a trust but you would want to use along with a LLC and it can be complex and you will need a lawyer to get all that done properly.. For most investors the LLC set up is fine and and more cost effective.

[GR8WhiTE]

 

 

It's just a liability thing.. Your potentional for law suits is greatly increased when renting properties so you don't want to have all your assests under one company. Also its important to keep proper paper work for your company(s) in case any one tries to pierce the corporate veil. One thing that is also good to do is to have more then one member in each LLC. If your the only member/owner then this is why the parent company thing is important. Parent company doesn't hold any property but LLC 1 holds property LLC 2 holds property etc. In LLC 1 & 2 you would have your self and the parent LLC listed as members thus making it a multi member LLC. This is done for a extra layer of protection because there have been some cases that judges have taken away the corporate protection due to the LLC being one member. This is very rare and not likely to happen but it could. I have personally seen this type of set up work perfectly for corporate protection.

Aren't Land Trusts a good way to go BR?

Yes you could use a trust but you would want to use along with a LLC and it can be complex and you will need a lawyer to get all that done properly.. For most investors the LLC set up is fine and and more cost effective.

I know even if you have the trust, LLC's are still a requirement. But I have heard the trust does protect you to the fullest if structured right.

[BRBiz]

 

 

 

 

 

 

It's just a liability thing.. Your potentional for law suits is greatly increased when renting properties so you don't want to have all your assests under one company. Also its important to keep proper paper work for your company(s) in case any one tries to pierce the corporate veil. One thing that is also good to do is to have more then one member in each LLC. If your the only member/owner then this is why the parent company thing is important. Parent company doesn't hold any property but LLC 1 holds property LLC 2 holds property etc. In LLC 1 & 2 you would have your self and the parent LLC listed as members thus making it a multi member LLC. This is done for a extra layer of protection because there have been some cases that judges have taken away the corporate protection due to the LLC being one member. This is very rare and not likely to happen but it could. I have personally seen this type of set up work perfectly for corporate protection.

 

Aren't Land Trusts a good way to go BR?

Yes you could use a trust but you would want to use along with a LLC and it can be complex and you will need a lawyer to get all that done properly.. For most investors the LLC set up is fine and and more cost effective.

I know even if you have the trust, LLC's are still a requirement. But I have heard the trust does protect you to the fullest if structured right.

Yes they do provide a extra layer of protection..

[dconawa]

Hello bfmanhaes,

 

You will need to become bank/tax compliant or bankable. However, your structure and how you structure will determine how you are protected. Setting up numerous LLCs to own each potential property can and will be disasterous to your income and the state fees would eat you alive. There is a better way using just one LLC and Trusts.

 

Good Luck

[GR8WhiTE]

Hello bfmanhaes,

 

You will need to become bank/tax compliant or bankable. However, your structure and how you structure will determine how you are protected. Setting up numerous LLCs to own each potential property can and will be disasterous to your income and the state fees would eat you alive. There is a better way using just one LLC and Trusts.

 

Good Luck

That's what I've heard