The PROS of Buying Real Estate with an LLC

actually all right we are back ladies and gentlemen with another ax mg this is Matt Garland in MLS number five eight seven zero zero better known as mg the mortgage guy we are live we are blessed thank God for another day make sure you guys like comment share subscribe um hit the bell for notifications because we are dropping new videos every day 4 P.M Eastern Standard Time and you can listen to the audio wherever you listen to podcasts Spotify uh Apple make sure you go download mg the mortgage guy show or podcast audio Outlets oh and don't forget to go to mgbookstore.com very important most important thing I'm gonna say today go to mgbookstore.com and make sure you pick up those bundles yeah too because I like what tooks is doing with all his graphics and everything right here that's what the I'm talking about bro y'all make sure here I go that's the first time I ever saw that too so that's why I get that reaction but uh make sure you go to mgbookstore.com all right so I'm back I got super producer extraordinaire Jordana with me today hello Matthew how are you Jordan Garland you are back I'm back alive like you never left man you know last week I was out bad the flu okay but I'm back no covet no covet thank God I'm free how are you I'm alive I see you out here coming back you have the DC glow on you yes DC has been was real um shout out to everybody who came to Howard University um ewil University's home buying Expo in DC uh was it powerful it was impactful it was powerful it was a lot of black and brown people on the building it was a free event shout out to our sponsors Chase for making that happen and it was it was phenomenal on a Saturday it's freezing but you got 1400 black and brown people um in the building taking notes learning about real estate credit business I mean we speak about everything from home buying to investing to credit to access to Capital um I mean we spoke about everything we spoke about free money with Grant programs so it was a lot of information in a short period of time that's amazing I mean you know I'm always a fan of black people coming on a Saturday to learn yeah about money and finances no it was definitely a good class and people learned and they got great actionable items so they can go out there and execute which is very important well shout out to the guys shout out to the whole eyo uh University the whole eyl nation eyl the Army having at the Navy you better yet the Navy all right so so let's what's the what's the question I mean we have a lot of questions but let's start off with one matter of fact and this is some of the questions so we did something different at this at this last yeah Expo we had a QR code that people could take a picture and scan and ask questions um you know complete a Google form and they can ask questions and in real time while he's on stage we would get these questions that were coming from the audience and during the last three panels we had we would do about 20 to 25 minutes of q a and I actually had a a 30 minute solo with the guys Troy Rashad was taking these questions and asking me directly um so the audience that was the dopest thing about it that we really the audience had they've always heard so we had four or 500 questions as you see on a spreadsheet there it's tons of questions so I said you know what we're going to take some of these questions yeah and we're going to start we're going to answer them because I feel like like a lot of people have the same questions so we picked out a few the same questions but they're all like they're important they're very important very important and we want to make sure that we are answering our audience questions to make sure that they are really retaining this information and they get value out of it yeah well I want to start with this girl her name is tati Stinson one of her questions was let's talk about the pros and cons of buying a property with an LLC okay now I know right you know a lot of the entrepreneurs everybody thinks it's all easy have an LLC but there's a lot of cons to it you have to know what you're doing that's not child's play right correct all right so let's break it down because I know that much strictly for live man not for freshmen okay so when you're buying an LLC I would say okay we start with the cons okay um so some of the comments I can think off the top of my head would be a high interest rate than a traditional conventional mortgage where you're putting into your personal name um so if you're now first let me say this when you're buying homes in your LLC 95 of the time it's for an investment property right so investment property interest rates especially in today's market are going to be higher than a conventional investment property interest rate so let's just say for example if you purchase the investment property in your personal name you use a conventional Fannie Mae Freddie Mac mortgage you'll probably get a rate somewhere around let's just say eight percent today right and we're in December we're filming this December uh what's it take it to 12 minutes so don't quote me on this rates this is just a quote this is not what you're going to get you still have to qualify I'm just using this as an example to give you guys a little bit of visual okay and if you use an LLC depending on the lender it can be anywhere from nine to eleven percent in today's market just depending on the lender the program Etc and also can be more expensive in terms of how many points or origination fees that you're going to pay as well wow what a traditional mortgage you're not you'll probably spend one percent maybe two percent max with a LLC um and and you're uh loaning your LLC name you'll pay two to probably four percent just depending on the lender um and what they want to charge you so depending on origination fees discount points it could be a little bit more expensive so that's one of the cons that I can um think of off the top of my head um but that's really the only con as I'm sitting here thinking about it well how are you what are they looking at how are you qualifying right are they looking at bank statement so this is where the pros come right so again if I think of another con while I'm we're talking about this I'll just say it but the pros to me outweigh the cons right yes you will get a higher interest rate yes it will be a little bit more expensive but your tenant is paying it that's the pro right right uh less documentation so with a conventional mortgage it's a full documented full doc commit mortgage meaning if you are a W-2 employee you need to provide your W tools for the past two years your 30 days of pay stubs two months of bank statements copy of your ID if you're self-employed you need two years of tax returns and we're going to qualify you off of the net income with the LLC you're not going to need any of that information the LLC can be a brand new LLC it doesn't need established business credit um you will have the personal guarantee it as the owner of the LLC you need at least a 620 640 credit score depending on the lender but you wouldn't have to provide all that income documentation so you're being qualified based off of the rental income of the property and launch that rental income can support The Debt Service which is basically the mortgage and the property taxes and expenses and the owners making at least a 20 profit then a bank will fund that project even if you are a first time investor now I'm glad I said first-time investor a con could be dependent on a lender they won't lend an LLC to a a newbie right yeah so there are some lenders out there that will say and it's probably I would say 40 of the lenders out there won't lend to a first-time investor with these type of programs but there's a good majority of lenders that will so that could be a con just depending on the person and which lender they're trying to seek a loan from and if they do lend to you if you're a ferry for this is your very first deal there might be a little bit of a premium of the points and the fees that you'll be charged just because you are newbie they might require you to put more down payment down as well um I guess a con well it's not a con since we're talking about down payment if you're comparing a two you both of them you're going to have to put down 15 to 25 so for a single family 15 for a multi-family 20 to 25 just depending on the deal so it's really the same thing it's equal um another Pro of the the LLC is you can potentially close faster because there's less paperwork the really main thing is the appraisal is what you really need to see what's the value what's the rent schedule let's see exactly if this thing is really cash flowing because sometimes people lie and just tell you oh it's getting this much in rent like the rent roll the rent rolls so we gotta look at that rent roll or the rent schedule that the appraiser is going to give the lender so when we underwrite it we're going to look at the lower of the two so if you tell me your rent is five thousand dollars a month but the rent roll or rent schedule from the appraiser on appraisal report says 4 000 that we're using the four thousand to get you qualified so you know that is a pro when you think about speed especially if you're in a competitive situation you'll be able to close a lot faster um another Pro is that if you're buying an LLC that mortgage won't go on your personal credit it goes on is on your business credit it's on the business side now if you default or something like that you personally guarantee this so that lender can come after you um because you're the PG but that mortgage won't show on your credit report so if you wanted to go buy a primary residence you don't own that house technically got it your business owns it got it not you Jordana got it so that's a pro tour keeps your debt to income ratio low now you know I'm the clear of the follow-up question okay go ahead so I remember one time you know we had a previous conversation about like llc's right so I remember you were talking about like where to file your LLC so there's like that whole Delaware conversation so how does that affect it like if your LLC is so it depends on the lender you know what I'm saying yeah yeah again we're just going with this one so it depends on the lender right there are some lenders that want you to file the LLC in the same state where you're buying the property at got it okay um there are some lenders that don't care okay it's so it just really depends on who's going to give you the best deal and what terms are more favorable to you as the investor um so you can definitely go ahead and try to file in Delaware one of these other places where it might be more advantageous from a tax perspective but the lender might come back and say no we need something here in the state like even like in Georgia right Georgia is for whatever you can still be listed on your LLC and people can still Google and find out you're the owner of the LLC unless you have like a like a managing age I forget the technical term for a registered agent um on the LLC and then 8 if somebody Google searches they'll see that data registered agent except for you um but you know that's sometimes if people don't file it LLC paperwork accordingly they don't know that they just they're so happy to file an LLC and they do it in their name right and then you can still be searched and found you know what I'm saying so um and again it's good to know your rules because sometimes against certain States will still have a public record of who is the owner of the LLC so you got to make sure you know that too when you create these llc's will the will the registered agent be listed or were you because if you're trying to be incognegro yes like you may not want that information out there yeah um another question I'm just speaking from tati standpoint so now would it be wise to get your first property with your LLC your first investment property well like let's say I'm saying for let's say if you have a nice little nest egg right let's say you have the money but you have a great business that's got the bank statement right and you've been living at home the same bank statement loans right so a bank statement loan is something that's completely different got it okay see I'm messing it up okay statement loans more of like a non-qm loan so when when I'm talk when I'm speaking about is buying you buying true investment properties now can you do a bank statement loan and put in your LLC even if it's a primary residence yes but Case by case depending on the lender but if you're buying true investment properties um do I think your first property should be an investment property just depends on you as a person you might be comfortable living at home you might be comfortable renting right now right and you might live in an area like New York DC La where it's so expensive where your 100K might not do anything do anything right but that 100K can get you in Detroit Milwaukee Ohio Ohio Connecticut you know one of these places where you can buy an investment property get some cash flow so yeah okay in that situation it might be more advantageous for you to buy your first property as an investment property and keep it moving from there all right but you just got to really know which lenders will allow you to use um to for you to be a first time home buyer and buy an investment property because remember when you're you have no experience of managing anything right so and these loans are already high interest rates and things of that nature so you're more of a risk to that lender because remember these are portfolio loans right these are loans that are not being sold on Wall Street Fannie and Freddie Mae is not backing them so it's more risk for the lender because they're keeping them on their books so they might not like you as a first-time home buyer they may want you to get some more skin in the game yeah but if you can't find a lender and you're ready to invest then hell yeah go for it it seems like to me from what I'm hearing it seems more Pros for sure more Pros there's definitely more Pros than cons 100 again as we've been talking about this the only con that I can honestly think of is just higher rates and higher fees but the higher rates are being paid by your tenants yeah and the fees if you buy right at some point if rates dip you'll be able to refine your if you purchased it right meaning below value right and exactly knowing your comps and everything like that there might be an opportunity for you to refinance and pull your money your original money back out the deal if you purchase right and the higher down payment protects you too you don't want to come if you can't afford it don't you know well you can't afford it well again you can't afford it you can't afford it you shouldn't be buying all investing if you can't afford right so ultimately there's little cons um and again the biggest one is rate fees but that's not really a huge con to me I think they're to to wrap put a bow on this I think there are more Pros to buying with the LLC than there are cons um so that's my opinion on that one I love it well if you love it then I love it and if you love it leave your thoughts in in the comments did I miss anything here you tell me what are your Pros what are your cons about buying property in the LLC um like comment share subscribe and again this is Matt Garland and MLS number 58700 but better known as mg the mortgage guy and I see you guys at the next video peace

Channel: MG The Mortgage Guy

Views: 51,314

Keywords: mg the mortgage guy, mgthemortgageguy, earn your leisure, home loans, mortgages, real estate, homebuyers, buying a house with an LLC, how to buy a house with your LLC, Should i buy a house with an LLC, can i buy a house with an LLC, buying real estate with an LLC, real estate investing, buying real estate with an llc, how to buy real estate with an llc

Id: uW7Mh6-vyI0

Length: 16min 0sec (960 seconds)

Published: Tue Dec 20 2022