LLC Yes Or No
I am just getting into rehabbing and reselling. My question is, Should I form a LLC to protect my house/family etc? My first few deals I plan on getting a Home equity line of credit to be able to buy with "cash", then either refinance, or flip the property rather quickly. Do I place my home at risk by using it for the Home equity loan? (not at risk if I default, at risk if someone sues me for falling down the steps for example??)
Thanks
And here I thought that the purpose of the LLC for your business would limit the exposure only to properties held by the LLC. Why in the world would you want to put your personal residence in the LLC, and expose it to the liabilities of the business related properties?
Definately do not take the advice offered in the previous post..
If you have the ability to get enough cash to purchase investment properties with a Home equity line of credit, you can then hold title to the investment property in the LLC. Your home is the collateral for the HELOC, not the invesment property.
If something goes wrong with the investment property your exposure is limited to the assets in the LLC. Your personal property should not be at risk.
You, not the LLC are responsible to make the payments on the HELOC.
Goog luck,
Jeff
Jeff,
Are you saying that if I buy a property with a HELOC from my personal residence and put the title to the boughten property in the name of my LLC and something happens and cannot pay, I will not lose my home? I am currently setting up a HELOC right now to buy properties all cash just as the other person stated above and was wondering the insides and outsides of the liability with it. Obviously I dont want to lose my personal residence, but if I am buying right there should be no risk.
What I was saying had more to do with liability issues. If you find your LLC named as a defendant in a lawsuit, and the title to your personal residence is not affiliated with the LLC, it would not be part of any judgement in the event the LLC lost. It would be protected. Any judgement would be limited to the asssets owned by the LLC. You would be listed as a defendant in your capacity as an officer of the LLC, not personally.
Land trusts are not the answer to every issue you may come across, contrary to what you may have been led to believe.
When you borrow money, if you borrow money as the LLC, then the LLC is responsible for the payments unless you personally guarantee the loan. Then you would be responsible for it if the LLC could not make the payments.
Sounds like the LLC is the way to go to limit my personal asset exposure. THe question is how to get the HELOC "cash" to the LLC for purchase purposes.
Thanks for the input
lerf:
It can be hard to get financing for a new LLC--think of it: your asking the lender to give thousands of dollars to an entity that has no track record or maybe even assets to lend against.
There are some posts here (and using Google) regarding how to build up a credit history for your LLC, but to answer your question, you can purchase the property using your name, then deed the property from yourself to your LLC. As Jeff mentioned, YOU are still responsible to make the payments, but your name would no longer be on title as owner of the property.
Also, work with your mortgage broker: they may have a lender willing to let you purchase in the name of the LLC, using your own personal credit as guarantee: LLC is on title, you are on the hook for the loan.
Andy[ Edited by arytkatz on Date 03/08/2005 ]
Even if you have to personally guarantee the loan it is still a good idea to use a LLC. You are building credit for the future and you are protecting yourself form non-debt liability.
Just trying to get a little clarity. If I deed title to my investment property to my LLC there will be no public record that identifies me personally after that is done? Does anyone have any opinion about having an LLC for each investment property?
I am trying to break into real estate. My current home is under my name with the bank. If I put my home in a land trust and make my new LLC the trustee.
How will this help my new LLC obtain credit?
Thanks
Baltierra