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in Real Estate Investing · April 22, 2021

Do You Need a LLC Buy a Rental Property?

Do you need one to start investing? No

Should you consider opening an LLC or Corporation before you buys? Definitely. 

Depending on your circumstances, an LLC may be a must-have. I am not a lawyer and I would highly recommend you do your research or talk to a lawyer beforehand.

If you ask me “Katherine, do you buy through an LLC?”

My answer is no. I made a conscious decision to not do this because of my circumstances. It made the most financial sense to me.

Hubby and I buy properties under our personal names. It is easier to finance, the interest rates are more favorable, and financing smaller properties is easier via conventional lenders. As a newbie is really hard to get financing under an LLC.

Our first set of investments, the duplexes, were purchased under our LLC, but our interest rate was 7.25% which is crazy high. We refinanced it under our personal names at a 4% interest rate. It was necessary because the properties were not cash flowing as much and couldn’t find anything better.

A couple of things that led to our decision:

We don’t have too many assets to our name as of now.

All of our properties have mortgages. Therefore, there is not much for anyone to take.

Our credit profile is on point.

We have high-paying W2 jobs and very little personal debt so lenders like us. Getting financing under our personal names is not difficult. An advantage of financing through an LLC is that most lenders don’t care for the individual’s income and some don’t even care for the credit score. I’ll touch more on the benefits of financing through an LLC towards the end.

We purchased umbrella insurance.

I had no idea what this was until recently, so apologize if I don’t do a good job explaining. This is the definition per Investopedia. “Umbrella insurance is a type of personal liability insurance that covers claims in excess of regular homeowners, auto, or watercraft policy coverage.”

So what does this even mean? An LLC is meant to protect you from liability in the event of a lawsuit. When you don’t have one, you are exposed. If a tenant slips and falls, they will sue you personally and everything you own under your personal name is up for grabs.

Your property insurance may cover some of it, but it may not be enough, so this is where the umbrella may come in handy. It may cover the difference. I found an article by  Royal Legal Solutions that provides a really good and detailed answer to the “Do you need an LLC?” The article is called LLC or Corporation vs. Umbrella Policy: Which is Better for Real Estate Investors? Check it out here.

A couple of things to consider. You can only have 10 properties financed under Fannie Mae/ conventional financing to your name. Therefore, eventually, you might have to go throw LLC.

While it is more expensive, there is an upside to buying under an LLC. Liability protection is one.

Another big perk is that you can find lenders that only look at the property income to qualify. They don’t care about your personal income. These lenders just want to make sure the property can pay for itself. This is especially good for self-employed individuals.

These lenders also vet the property and if they don’t think the property is a good deal, they won’t give you the loan. In a way, they l reassure you that you have a solid investment. This is no replacement for making your own analysis. You must have your own property vetting process.

Most of these lending companies still look at your credit and give you an interest rate based on that. The better the credit, the better the rate. You may still get a loan even if your credit is bad, but you may end up paying a high-interest rate.

There are also small community banks that have what they call portfolio loans and they will lend to an LLC and have you as a co-signer. They will go through the whole vetting process as you would with a regular loan, but Interest rates will be more favorable.

So, no. You don’t need an LLC to get started in real estate so don’t let this stop you from taking the first step.

This post may contain affiliate links. I may get commissions for purchases made through links in this blog.

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New Blog Post 🚨 In this week’s blog post I am New Blog Post 🚨 In this week’s blog post I am going over why we bought a short-term rental, our experience so far. Plus what we did prior, during and after purchasing our first short-term rental in March 2022, a Cabin in Blue Ridge, GA.

Check it out at www.beyondjustnumbers.com or link in bio @beyondjustnumbers
I can’t stress this enough. Some investors are l I can’t stress this enough. Some investors are looking to make money from day one, but that’s not always the case. It wasn’t for us and I’ve talked to a lot of rookie investors who have told me “Thank God I have my personal finance situation together.” 

This is just my opinion. Do you agree? Let me know in the comments!

Want to join a free community of like-minded individuals? Join our REI Coffee Chat Community where we talk real estate investing, personal finance and financial freedom, and much more! Link in bio @beyondjustnumbers

Want to learn more about investing in real estate? Read my blog www.beyondjustnumbers.com

#realestateinvesting #realestateinvestor #creativefinancing #investmentproperty #buyrealestate #firemovement #debtfreejourney #financialindependenceretireearly #rentalproperty #investinginproperty #personalfinanceblog #wealthbuilding #planforretirement #investorlife #livefree #airbnb #moneyisfreedom #enjoythejourney #reicommunity #realestateinvestments #shortermrentals #cashflow #realestate
I used to think that investing in real estate was I used to think that investing in real estate was for the rich. I became in love with real estate while working for a real estate investment company that owned hundreds of units. This was back in 2011 and I was 20 years old at the time. I had less than 5 years permanently living the US, so I had no idea about anything. I grew up in Colombia and the only talk of money we ever had was the lack of it. 

The investors I worked for were a wealthy family, so naturally, I thought… Real Estate requires wealth. I don’t have wealth. Therefore, I cannot invest. 

I figured… well shit, I need become wealthy so I can invest in real estate. Eventually, after educating myself I realized how wrong I had it. You can build wealth BY INVESTING in real estate.

Took me a couple of years to figure it all out. Hence, why I didn’t start investing until 2019. I wish I had figured out earlier, but it is what it is. In just 3 years of investing in real estate, I was able to accumulate more wealth than I ever thought possible. 

Just to give you an idea…Did you know you could invest in real estate with as little at 3.5% of the purchase price? For a $150,000, that’s only $5,750. Buy a duplex that needs a little bit of work, fix it up, rent one side and live in the other. This will reduce your monthly expenses significantly, save the money and do it all over again.*

Of course it’s not that simple, but it’s also not that difficult. There are some particular steps and considerations which is  why I recommend doing further reading on the subject. 

Book Recommendation:
✅“The House Hacking Strategy” by Craig Curelop and ✅“Investing in Real Estate with No (and Low) Money Down” by Brandon Turner. 

#realestate #realestateinvesting
🚨 New Blog Post! Continuing the “Getting Star 🚨 New Blog Post! Continuing the “Getting Started in Real Estate Series” 

You’ve found a property either on your own or through a realtor, you’ve run your numbers, you’ve got a lender and now you are ready to make an offer. What’s next?

In this post I want to discuss a few items:

✅Key components of a real estate contract
✅How do you make a compelling offer to ensure you get the property you want
✅The main contract contingencies and how they work
✅Communicating with your realtor

I also provide real examples of what we have done personally. 

Check it out at www.beyondjustnumbers.com

Let me know what you think!
If I listed all of the hats, I’d never end 😂. If I listed all of the hats, I’d never end 😂. Anyone else? Show me the multiple hats you wear and tag me. Let’s have fun with some reels.

Trying to get good at the real game like @investinginyourwealth. How did I do?
The fact that you are not where you want to be doe The fact that you are not where you want to be doesn’t mean you won’t get there. Greatness takes time. Focus on what you control.

And remember, it’s okay to pivot.

#mindset #realestate #firemovement #realestateinvesting #realestateinvestor #rentalpropertyinvestor #rentalproperty #cashflow #motivation #financialfreedom #financialindependence #financialindependenceretireearly
We see a lot of advice around hiring a real estate We see a lot of advice around hiring a real estate friendly CPA. However, when you look up  CPAs that specialize in real estate, they can be pricey.  However, that doesn’t mean that other CPAs or tax professionals aren’t good. They might not be particularly aware of certain items, but they can research and collaborate with theirs peers. Perhaps it may require you to do a little of work to compensate. Things you can do:
✅ listen to The Real Estate CPA podcast or join the Facebook group
✅follow social media accounts of the pricey Real Estate CPA and take notes of what they are saying
✅attend free educational events 
✅read BiggerPocket book on Real Estate taxes 
✅if you know anyone working with a really good Real Estate CPA firm, ask them what they are doing

Then use that to go your CPA or tax professional and be like “Hey, is this something we can do for me?” They’ll probably say, “Let me look into it”. 

If they are good, they are going to research it and/or ask their CPA peer group. (CPAs and tax preparers also have Facebook groups where they collaborate with each other).

Here is a piece of advice, if they tell you “No, we can’t use this loophole or no, you don’t qualify to use this strategy” —> Ask WHY and “How can I qualify in the future?.” This way you confirm they did their homework and aren’t just being lazy. Don’t just take no for an answer. You can then get a second opinion by asking a question in a forum or to your peers.

So don’t panic if you don’t have a real estate CPA or tax professional. 

Next video I’ll be answering the question… “Can I skip the tax professional altogether and do my own taxes?”

#realestate
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