Creating an LLC for Your Real Estate Investments
For investors interested in starting a real estate investment company, forming an LLC is an important step. Most private lenders, like Lima One, require an established LLC for loan approval.
A real estate LLC serves as a business entity – separate from the individual – that allows investors to buy, sell, and rent out investment properties while maintaining control over the profits.
Real estate investing is one of the most popular forms of major asset investments for individuals, and an LLC is a particularly valuable tool when it comes to real estate investing. Whether an investor wants to flip houses, scale their rental portfolio, or invest in multifamily units, it’s common to put money into real estate holdings using an LLC.
Despite high return potential, real estate investing can be a risky market. When things are going well, investors can see high profits. When the market isn’t doing well, investors could be left holding a mortgage worth more than the market will pay for the house.
This is where creating a real estate LLC becomes valuable. Through the LLC, the company buys each property – not the investor – and the LLC will own the property. This allows investors to work together to form an LLC to purchase properties and decide on how they’ll split profits.
Also, Lima One and some other private lenders will check borrower FICO and credit qualifications, but not report those to credit bureaus because the loan is held by an LLC and not an individual.
As a result, if a borrower has business-purpose loans with multiple lenders, these loans don’t show on an individual’s debt-to-income ratio, allowing the individual to qualify for conventional or primary mortgages more easily.
Plus, once an LLC is formed and underwritten, loans on future property purchases through that LLC require a simpler loan underwriting process.
Benefits of Creating a Real Estate LLC
Along with limiting personal liability, a real estate LLC offers an opportunity for multiple investors to be successful through real estate acquisitions without going through deed changes. It also allows them to invest together and decide percentage of ownership – including how they’ll split profits and losses.
Establishing an LLC for real estate investing creates a profit potential for investors. Real estate investors aren’t limited to filing LLC paperwork in just their state. They can file in multiple states, which can sometimes lead to additional benefits, tax incentives, and more relaxed rental laws through out-of-state investing.
For instance, Florida’s state laws and regulation make it one of the top states for long-term real estate investing.
Investors filing a real estate LLC in different states may see additional fees and paperwork, but with the right investment strategy investors could see a high ROI.
Making the Most of Your Real Estate LLC
Real estate investing can be a lucrative career. To make the most of their career, investors should take advantage of the protection and advantages an LLC offers. Plus, business-purpose lenders like Lima One won’t provide financing for real estate investments without an LLC.
Real estate can be a great investment, and choosing the right strategy, loan type, and lender is key to getting started.
Lima One Capital is one of the best lenders in the industry. We offer the best loans for real estate investing from new construction loans, simple bridge loans, rehab and fix & flip financing, and stabilized multifamily loans to the most complex structured finance solutions.
With a nationwide presence as a trusted lender, we offer a robust suite of products designed to help every investor regardless of their investment strategy. As the premier lender for real estate investors, our goal is to help investors scale their business and close deals quickly.
Contact us today to discuss your next deal, or if you have a deal in hand, accelerate the process by applying now.