Form LLC Or Purchase Property First?
I am new to all this but hope to start investing in rental properties shortly. from all Indications, my credit is fine so I should not have a problem getting a mortgage in my name to start out. My question at the moment is whether I should form an LLC first and then purchase the property or purchase first then form the LLC?. Also, I tend to purchase several pieces over the long run so should I form a separate LLC for each?. to clarify, I intend to buy and hold.
thank you all for your very valuable input.
:-?
I would form the LLC as soon as possible but would not pass up any slam dunk deals in the meantime because I didn't have my LLC in order.
I like having one LLC and using land trusts to hold my properties. Some disagree with this approach but from my research it seems the best way. Lawyers will tell you to do an LLC for each...they make very little money off of land trusts
Ray_Higdon,
Thanks for the reply. Like I said I am new at this and just looking for the best way to get things done. My question now is, what is a land trust and how does it relate into an LLC?. Thanks again.
Form the LLC first and than transfer the property, banks don't loan to trusts and comforming loans are cheaper than commercial loans.
Be aware that it's harder to borrow money as an LLC than as an individual; that there are some hoops to jump through. I had trouble getting insurance for a property I bought in my LLC and ended up just deeding it back to myself because I didn't want to deal with the hassle. Some insurance companies are hesitant to write policies for property owned by new LLCs. But the sooner you get your LLC, the sooner you can pave the way for getting it in play.
I am in CA.
What is the cost of forming LLC in CA. I saw some website www.incorporate.com I believe.
So it might be difficult to get insurance if you form LLC after purchasing? How to prevent this hassle? Other considerations with LLC?
Quote:
On 2004-09-04 21:33, jamesCA wrote:
I am in CA.
What is the cost of forming LLC in CA. I saw some website http://www.incorporate.com I believe.
Do a google search for incorporation, llc, inc, or the like and you'll find dozens(if not hundreds) of companies willing to inc you.
I've heard the figure 800 USD batted around many times when talking about LLC's in CA. Even if you organize somewhere else, I believe you have to pay that in addition to any income taxes if you do business in CA.
Hey damelect
I posted some URL's earlier but guess they were taken off. Search for bronchick "land trust" in google and you will find some good articles
Ray,
Thanks for the info. I will look up those articles as you recommended. Thank you all for your time and efforts in trying to answer my questions.
Regards
Just go to your local Secretary of State's office and file for your LLC. It should only be 1 or 2 pages, and it will cost you about 1/3 - 1/4 of the price those companies are charging.
The Sec of State's website will give you the steps and fees. In GA, they even have a sample Articles of Organization.
If you plan to rent the properties, you may want to form a Corporation to manage them, collect rent, pay expenses, and then pay your LLC any profits. The Corp can deduct more than an LLC. There are probably some articles on this site about forming companies for REI.
Pete