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LLC question for rental property purchase
Posted on 1/25/14 at 4:18 pm
Posted on 1/25/14 at 4:18 pm
I'm looking into buying some rental property and if so I'd like to set up an LLC for it. I'm not sure how long it takes to setup an LLC but do I need it fully set up prior to putting in an offer for the house? Or as long as I have it by closing time and sign everything under the LLC, that would suffice?
2
Posted on 1/25/14 at 4:40 pm to Htown Tiger
I'm not sure of the process in Louisiana so take this with a grain of salt.
I didn't start an LLC until after I purchased my second rental property. Go ahead and buy the property and start on the LLC now. The paperwork is pretty quick and cheap. It took about 3 weeks to get your paperwork back from the state.
It is a relatively painless process to change the deed from your name to your LLC later down the road.
Don't pay an attorney or even legal zoom to start one. It is very simple to do yourself.
I didn't start an LLC until after I purchased my second rental property. Go ahead and buy the property and start on the LLC now. The paperwork is pretty quick and cheap. It took about 3 weeks to get your paperwork back from the state.
It is a relatively painless process to change the deed from your name to your LLC later down the road.
Don't pay an attorney or even legal zoom to start one. It is very simple to do yourself.
Posted on 1/25/14 at 4:53 pm to I Love Bama
Thanks Bama. I've enjoyed reading your real estate posts. This purchase won't meet the 2% criteria that I know you like, but it's about 1.5%, which isn't too bad for Houston. I'm getting pretty close to pulling the trigger.
Posted on 1/25/14 at 5:07 pm to Htown Tiger
quote:
but it's about 1.5%, which isn't too bad for Houston.
Not terrible. You also get the benefit off appreciation which I don't count on at all. You're in a great market.
Best of luck to you.
Posted on 1/25/14 at 6:24 pm to Htown Tiger
File the LLC prior to closing. It would help to have it before the purchase agreement is signed so that you will not have to assign the purchase agreement to your new LLC. You can literally have the LLC set up in a day or two on the internet.
The title company will prepare a certificate of authority that states you have the authority to purchase property on behalf of the LLC.
If you transfer the home to the LLC after purchasing it in your name, there will be a document prep charge for the the act of contribution and an additional recording cost(in EBRP it would be $70).
Eta: Regarding not paying an attorney to start the LLC: I agree you do no need to speak with one if this will either be a single member llc or just you and your wife. If you have multiple members, it would be a good idea to at least discuss with an attorney potential issues that could arise in the future.
The title company will prepare a certificate of authority that states you have the authority to purchase property on behalf of the LLC.
If you transfer the home to the LLC after purchasing it in your name, there will be a document prep charge for the the act of contribution and an additional recording cost(in EBRP it would be $70).
Eta: Regarding not paying an attorney to start the LLC: I agree you do no need to speak with one if this will either be a single member llc or just you and your wife. If you have multiple members, it would be a good idea to at least discuss with an attorney potential issues that could arise in the future.
This post was edited on 1/25/14 at 7:32 pm
Posted on 1/26/14 at 10:04 am to NEWBIE
I'm not sure if you are financing this, but I would check with your lender, before you go amending a purchase agreement.
Make sure they will allow for the mortgage to be in the name of an LLC
If they don't, buy in your name(set up llc online, takes 1.5 Days) aand then complete an act of donation/transfer.
Make sure they will allow for the mortgage to be in the name of an LLC
If they don't, buy in your name(set up llc online, takes 1.5 Days) aand then complete an act of donation/transfer.
Posted on 1/27/14 at 8:43 am to SomethingLikeA
FWIW, in South Louisiana, homeowners insurance companies are sometimes funny about writing policies to LLCs. That was my experience at least (I have USAA). I have my rental property in my name, but added an additional $1mm personal liability umbrella policy.
Something to think about.
Something to think about.
Posted on 1/27/14 at 8:53 am to YouCantSeeMe
Thanks all, for the responses. I have heard about the umbrella policy as well, so I may go that route (I believe they are fairly inexpensive). Maybe if I expand beyond this rental and acquire more I may consider an LLC and moving them under it.
Posted on 1/27/14 at 9:06 am to I Love Bama
(no message)
This post was edited on 2/25/14 at 12:49 am
Posted on 1/28/14 at 7:32 am to bigblake
Check with a real estate attorney. I went through this a few years ago but I thought the cost was mainly for the filing at the clerk of court. Don't remember it being a huge expense.
Posted on 1/28/14 at 2:12 pm to I Love Bama
quote:
quote: but it's about 1.5%, which isn't too bad for Houston.
Can you explain this bama? I'm assuming 2% of the purchase price received for rent every month??
Posted on 1/28/14 at 3:11 pm to LSUTOM07
quote:
Can you explain this bama? I'm assuming 2% of the purchase price received for rent every month??
Yep
Posted on 1/28/14 at 3:11 pm to bigblake
quote:
Bama, how much were the fees for moving the properties to the LLC? I briefly looked into forming an LLC but was worried that I might have to pay ~1.5% of the value to move them to the LLC.
The fees are not a percentage to transfer, at least not in La. They include the cost of preparing the actual contribution document and recording costs. Those costs would be at your parish/county clerk of court.
quote:
I'm not sure if you are financing this, but I would check with your lender, before you go amending a purchase agreement.
Make sure they will allow for the mortgage to be in the name of an LLC
If they don't, buy in your name(set up llc online, takes 1.5 Days) aand then complete an act of donation/transfer.
You will need express, written consent from the lender to transfer the ownership of the property to an LLC. The bank may even require you to originate a new loan in certain circumstances. I would speak with the lender before you close about your plan to transfer to an LLC.
This is why I recommended to initiate the loan process through the LLC and you personally guarantee the loan. It can make life easier in the long run.
This post was edited on 1/28/14 at 3:25 pm
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