What's An LLC?
LLC means “Limited Liability Company”. An LLC is a corporate structure in the United States for which the owners are not personally liable for the debts or responsibilities of the company. Limited liability companies are hybrid entities that combine the characteristics of a corporation with those of a sole proprietorship or company.
When is the best time to get an LLC?
Assuming you already have both: a) good personal credit (in this case, a FICO of 700 or more) and b) existing properties that you are already renting, the best answer would be: as soon as possible (since you don’t want to delay the benefit of building business credit).
In fact, there are investors who open several LLCs at the same time in the state where they plan to have the properties. That way, they can start building business credit right away and have LLCs available by the time they close on a mortgage.
Otherwise, you will have to factor in the time it takes to get an LLC created (between 2-4 weeks depending on the state).
If you do not have properties yet, then it is better that you wait until week 4 of the Real Estate Nova program to do everything right from the beginning.
Once you have understood everything in week 4, you can apply the strategy of opening several LLCs in the state where you plan to invest and have them “parked”, ready to be used.
What is the best state to open an LLC? (additional details in week 4 of the program)
Nevada or Wyoming for your Holding LLC (details in week 4). For each property, you plan to buy: in the state where the property is located.
How long should I wait before applying for business credit after opening an LLC?
The very first thing you should do after opening an LLC is to open a business checking account (that takes precedence over business credit). Once that is done, and assuming you have good personal credit (a FICO of 700 or more), you can apply for business credit after 6-9 months of having established your LLC.
I’m closing on a mortgage with the bank, can I close the mortgage under an LLC?
NO – if you are using a residential mortgage. Residential banks are only allowed to close mortgages with individuals and not with companies. These rules are dictated by financial regulatory entities (example: the Federal Reserve, the FDIC, etc.)
YES – if you are using a commercial mortgage (since they are governed by different regulatory rules). To learn more about mortgage types, go to your lessons from week 1 of the Real Estate Nova program.
Why wouldn’t a bank let me close my mortgage under an LLC?
Residential banks are only allowed to close mortgages with individuals and not with companies. These rules are dictated by financial regulatory entities (for example: the Federal Reserve, the FDIC, etc.)
I closed a property under my name, how do I transfer the title to an LLC?
The details of this question are covered in week 4 of the program. If it is possible to wait, hold on to see the class. If not possible, you can contact a real estate attorney who will help you with the transfer of ownership. Before making the transfer, consider opening an LLC with an accountant or the same real estate lawyer.
Once the LLC is ready, the real estate attorney will have to review your mortgage documents to review the clauses before transferring your name to the LLC.
I bought a house cash, how do I transfer the title to an LLC?
The process is the same as the one in the question “I closed a property under my name, how do I transfer the title to an LLC?”
I have a property with an FHA loan, can I trasnfer the tittle to an LLC?
Properties with FHA loans have more stringent regulations as they are backed by the government. The best thing you can do is take the mortgage documents to a real estate attorney to read them correctly and understand the clauses. If there are no clauses that prevent you from transfering title to an LLC, the attorney will guide you through next steps. And if you can’t, the attorney will inform you accordingly.
Can I open an LLC if I only have an ITIN?
Yes, more details of this can be found in week 4. In order to create the LLC with an ITIN you will need the help of an accountant or CPA (which stands for Certified Public Accountant)