LLC for rental property

Asked by Anokh, Irvine, CA Sat Jun 18, 2011

I am planning buy a rental investment property in Bay area, California. Is it a good idea to form a LLC first and then buy the property on LLC name? How easy/difficult is it to start a LLC in California. Are there any agents in Bay area that are specializing in rental investment properties?

Help the community by answering this question:

+ web reference
Web reference:

Answers

14
Elva Wormley, Mortgage Broker Or Lender, San Jose, CA
Sat Jun 18, 2011
Hi Anokh,

if you're planning to finance your purchase, you may find you have more options if the loan is in your name versus an LLC.

Best wishes,

Elva Wormley
Cobalt Financial Corporation
2 votes
Rudi Hofmann, Mortgage Broker Or Lender, El Segundo, CA
Mon Jun 20, 2011
Add to previous comment.

Also with financing in the name of a LLC, lenders will require personal guarantees.

Happy funding, Rudi
Web Reference:  http://www.umboc.com
0 votes
Rudi Hofmann, Mortgage Broker Or Lender, El Segundo, CA
Mon Jun 20, 2011
I disagree that forming an LLC is a good idea. Having adequate insurance coverage is a good idea. I''m not a CPA or a Tax Professional, from my experience it's wasted money. I used to be Inc'ed.

For an LLC to seek financing, the LLC must have filed 2-years prior Federal Tax Returns. That doesn't work well in your situation.

Happy funding,
Rudi
Web Reference:  http://www.umboc.com
0 votes
Michael Robe…, Agent, San Ramon, CA
Sat Jun 18, 2011
Hi Anokh, I would always advise a client to use an LLC when the goal is to have a group of investors to share the investment. Usually, an LLC is a tool best used to increase your purchasing power while speading the cost burden of maintenance. There are tax implications to cover in your discovery as well. See a tax professinal too!!!

Elva's strategy is a great way to streamline your loan process. *thumbs up*

An LLC is a very easy thing to do. There are a number of fascilitators (sp) you may find useful. Your LLC name will take some time to get approved so, if you are interested in the idea....get started now. You may be able to use the LLC for a number of things unrelated to your first purchase.

My clients use an LLC template that is designed for any number of investors...You don't have to go it alone!

Glad you are taking appropriate measures to educate yourself! knowledge is power. Have fun and good luck!

Michael
http://LosGatosHomesandRealEstateBlog.com
0 votes
Gerard Carney, Agent, Spring Hill, FL
Sat Jun 18, 2011
LLC for property investment is advised, but it is always god to Run this past a CPA to see if this or an S Corp would be better financially and for legal protection of your personal assets.
0 votes
Christopher…, Agent, San Jose, CA
Sat Jun 18, 2011
I absolutely agree with Charles and Elva. Informing yourself is the best course. Then you can feel confident about your decisions.
Additionally, hiring a property manager is highly recommended.

Kind regards,
Christopher Cossitor
Web Reference:  http://www.cossitorgroup.com
0 votes
Clark Riel, Agent, Reno, NV
Sat Jun 18, 2011
Setting up and LLC is pretty easy and you can purchase the property in your name and obtain financing then close in the LLC.
0 votes
charles butt…, Agent, san jose, CA
Sat Jun 18, 2011
Also I see that Elva Wormley answered your question at the same time that I did. Elva is an excellent person to talk to about financing. Elva has a great deal of experience financing Rental Investment Real Estate. She is very knowledgable and I recommend her very highly.
0 votes
John Arendsen, Agent, Leucadia, CA
Sat Jun 18, 2011
I might need a little more info. I'm not quite sure why you feel you would need an LLC for a rental property. I have several rentals and don't have any LLC's asociated with them. Now if you are investing with other investors it may be prudent to establish an LLC. But I certainly don't see the value or necessity as an individual.
0 votes
charles butt…, Agent, san jose, CA
Sat Jun 18, 2011
I recommend that you talk to a Real Estate Attorney about forming the LLC.

With respect to investment Real Estate, I and many other Real Estate Brokers have a great deal of experience with rental investment properties.

However, with respect to forming an LLC, I recommend that you talk to a Real Estate Attorney about that. I work with Real Estate Attorneys, I can recommend some very good Real Estate Attorneys for you to choose from.
0 votes
Gabriel Nguy…, , Campbell, CA
Sat Jun 18, 2011
I mistyped the Secretary of State website: http://www.ss.ca.gov
0 votes
Gabriel Nguy…, , Campbell, CA
Sat Jun 18, 2011
Here is my answer:

First, if you plan to finance the rental property, your LLC must have a good credit just like other buyers out there. Unless you pay all cash then it's a different story. If your LLC is newly formed, it's hard to obtain loan since your LLC has no credit.
If you form an LLC after COE, you must transfer the title to the LLC and subject to your LLC credit history. You can go to California Secretary of State website at http://www.ss.gov to check for name availability and apply there. Or you can go to http://www.lawinc.com and they will help you out.

Second, I can assist you with the rental investment properties since I do this all the time. You can contact me at 408-426-1441 and we can discuss more on what you need and what we provide.

Have a wonderful weekend!

Second,
Web Reference:  http://www.4reohomes.us
0 votes
Andrea Wince…, Agent, Milpitas, CA
Sat Jun 18, 2011
An LLC Limited Liability Corporation involves the forming of a Corporation through a filing through the Secretary of the State of California. You can procure an Attorney or do it on line through the web on links such as Legalzoom.com If you want me to email you a list of available properties, please contact me through my Trulia profile. kind regards.
0 votes
Shane Milne, Mortgage Broker Or Lender, South Jordan, UT
Sat Jun 18, 2011
You start an LLC by filing an "Articles of Organization" and paying a fee to the Secretary of State. For financing you'll also need to create an Operating Agreement which states the rights responsibilities of the LLC owners (if it's just you then it'll be simple). Processing time usually takes a couple weeks.

See http://www.sos.ca.gov/business/be/starting-a-business-types.htm on "Starting a Business".

LLC lending, Non-Personal Borrowing Entity, or "Entity Vesting" lending, is a tough to find nowadays. Just a few years ago there was a slew of lenders doing it - World Savings, ABConduit, Bank United, and Washington Mutual were the 4 most popular. Bank United is the only one of those 4 still around today, and last I checked they didn't have their entity vesting program anymore. I know of a lender in Washington state that does them still, 65-75% LTV, 30-year fixed rate's in the 6's, they lend all over the western U.S. except for California. I suspect that there could be some lenders in California still permitting it, but it would be similar or lower LTV's. Financing in your personal name could result in just as little as 10% down, but for best terms 25% or more is suggested.

Other than insulating yourself from personal liability (like someone slipping & falling - which you may want to check into liability insurance for), were there other items you were looking to accomplish by buying in an LLC rather than your name? Realize that you are still required to be a personal guarantor, so putting property in an LLC doesn't limit your liability from that debt.
0 votes
Search Advice
Search
Ask our community a question

Email me when…

Learn more