Should I form an LLC? I Have over 10 investment properties?

Question

I have currently been paying cash for my properties and then taking a loan out on them for my money back after i rehab them. My question is since i have acquired over 10 properties alot of banks are now being reluctant to lend me money because i have over 8 mortgages in my wife and I's name. Is forming a LLC the way that some people have over 80 investment properties. I know the local guys in my town are paying cash for these and pulling there money back out of them after they rehab them. I have an excellent income to debt ratio also.
any help from investors is appreciated
thanks in advance

Answer 1

As a former lender, the answer is forming an LLC will do nothing for making money available to you. The reason is that the same cash flow standards applied to you will be applied to the LLC. Since you have personal income in addition to the properties, it can be considered for inclusion in the loan. If you segregate out your income from work from the LLC, you now have less cash flow for the bank to consider, further, they will still require you to guarantee the loan, just in case you embezzle. Your credit rating will remain unchanged.

Banks will gladly loan you money, up to the point you cross their cash flow guidelines.

Now there can be strong advantages to a S-corp or an LLC. S-Corps have the advantage that you could shield some of your earnings from social security if you do it correctly. LLC's have the advantage that you can make them wink out of existence easier.

Both forms give you a little personal shielding from liability. IT ISN'T TRUE that if you form a corporation then you can avoid unlimited personal liability. Officers, principal shareholders and directors (of which you would be all) have unlimited personal liability for the acts of the corporation. The corporate shield protects non-controlling investors, not controlling ones. That said, there is some protection because they must first "pierce the veil" of that liability protection but a good lawyer will do so, it is just one extra step.

Answer 2

Yes but for different reasons than you think. When you form an LLC, its credit rating is going to be directly to the owners of the company until it can be proven as its own entity. Banks in particular don't like LLC because if the company fails to pay its payments they can only go after the property as collateral and not your individual assets like they currently can. In some cases the establishment of one LLC with enough assets to offset the risk on the loans will please banks into making loans, but this is rarely better than the situation the individual would have anyway and is thus majority irrelevant.

LLC can provide many tax benefits over owning the home yourself and I advise you look into the subject that way and as a way to reduce legal risk.

Answer 3

LLCs are Limited Liability Corporations, all they do is remove your personal assets from liabilities and can only be sued for what is put into the LLC or that persons portion of it can be taken from their personal property.

EG: you owe someone 1mil and you only have 250k wrapped into the company, the 1mil is your sole liability, the other investors do not get penalized for it, but you get the onus on you because it is solely you.

Therefore, LLCs are good, but they can bite you the same, LLC is a step after a Limited partnership, the best way is incorporate fully, so that all assets are owned by the business and only the business can be sued, you are untouchable

Answer 4

i does no longer waste my money, maximum LLC's are completed improperly and don't incredibly have the money for safety from legal accountability. I propose you bypass to a place of origin economic enterprise or attempt a advertisement own loan.