Hey, folks.
Matt Horwitz, LLC University.
Hope you're doing well.
Let's talk about a major mistake that real estate investors make in regards to set up
their LLC.
Just got a phone call today and we've gotten dozens and dozens and dozens of these phone
calls.
People phone in saying, "Hey."
They've done some research.
They've learned that they need to set up an LLC for their investment properties so that
they can protect their assets, but they already bought their property in their name.
They think that just setting up the LLC is going to somehow magically protect their assets.
That's not the case.
If you think about it, those properties are owned by you personally.
Just setting up an LLC, it's not affiliated with that at all.
An LLC doesn't protect anything you do magically, right?
You're setting up an entity.
You're creating an entity, you're creating an entity by state statue.
That entity, therefore, needs to own the property and do the business.
What I mean by that is that when you're purchasing the properties, you're purchase contract,
your agreement of sale, the deed, any financing, all of that is in the name of the LLC.
The LLC holds title to the property, not you personally.
Got a phone call today from a guy in California who owns three different properties all financed
by three different banks and wanted to set up an LLC to protect his assets.
I said, "Yeah, just so you know, don't go ahead and set the LLC up right now.
What you need to do is you need to call each one of the different banks to see if he can
refinance or transfer the title and how that's going to affect the loan."
Once people kind of understand like, "Okay, cool.
I realize that I need to transfer the title into the name of the LLC."
Right.
They realize they need to do that.
Sometimes it's called a dollar deed.
Basically, where you are in the United States, it's going to be sometimes the name of the
deed may be called something different.
There may be different fees, but essentially you're going to be selling the property for
one dollar from yourself to your LLC, but if you have financing and you have mortgages
attached to those properties you can't just knock it out and do it really quickly.
You have documents and documents and mortgages and clauses and things that you signed at
settlement.
Just because it's going from you to your own LLC, it doesn't matter.
To the finance company, it's going from the seller to a different buyer, right?
You need to pick up the phone, call the different bank and say, "Hey, look.
I need to get this title out of my own personal name and put it into the name of the LLC."
Now, some people are going to be out of luck because some banks may not allow it.
If they're going to be lending to an LLC even with you personally guaranteeing the loan,
it's no longer going to be residential loan.
It's therefore a commercial loan and commercial loans take place usually within a different
department in the bank.
They have different terms and they have different rates.
You're essentially refinancing the property in the name of the LLC.
It's a bit of a mess really.
Hopefully, if you're watching this video you've caught it before you purchased your property.
You need to purchase your property and obtain your financing in the name of the LLC and
order for that LLC to protect your
personal assets.