A friend and I want to start a company to start flipping homes. We’re getting the loan in one of our names, with the other as a co-signer. My question:
Can we and/or should we transfer the home to the company? How do we purchase future homes under the company name, instead of our own?
Sounds like it could be a good candidate for an LLC…
But I’m not an expert, you might want to contact one…
You could form an LLC to do this. If you chose to form the LLC, you would file the Articles of Organization with your Secretary of State and get an EIN (employer identification number) from the state too. Once your name has been accepted, you can go open a business checking account. You could probably find a bank to loan to the LLC as long as you and your friend will sign as guarantors on the loan. You should also make an Operating Agreement for the LLC. The bank will want to have a copy of that on file if they loan to the LLC. When signing documents for home purchases, you will sign your personal signature and then print the business name behind your signature.
Not saying you should or shouldn’t do the LLC. Just showing you some of the steps involved if that’s what you choose to do.
Thanks, great info.
So is that it, when filling out paperwork we’ll sign our name but print the name of the company? Seems kind of simple. Here’s another question, what do the banks check that is similar to a credit history check for an LLC like it would for an individual?
There are other things involved. One main thing is you want to avoid “co-mingling” your personal funds with the business funds. This means any money you put into the LLC should be loaned to it so the LLC is not viewed as an extension of you personally. It’s a business and you want to treat it as such. When we need to infuse some money into our LLC, we draft a promissory note for the amount, set up a payment plan, and charge interest. You should also have a corporate resolution when making major purchase decisions like buying a house to rehab. So there are some other things involved, but the main one is to avoid the comingling of funds.
I’ve seen several people post on here about a place called creditboards.com where you can learn all about developing business credit. You can get a Dunn & Bradstreet number and also some store charge accounts like Lowe’s to help build the LLC’s credit. There’s also a Paydex score that I believe is kinda like a FICO score for the business. We never worried about any of that stuff. We just signed as guarantors every time the business bought a house. With a new LLC, the bank is going to look at the creditworthiness of you and your friend heavily. You can’t just form an LLC and get a huge line of credit if you can’t back it up personally.
Thanks Justin that was EXTREMELY helpful. You seem to know alot of the subject, so if you any other do’s and don’ts that I should keep in mind by all means, let me know. Thanks again.
A question on the promissory note from your last post, would that apply to any kinda start up money that we put together? Do we need to charge the company a percentage, or is that optional? I’d rather reinvest as much of the money that the company makes as we can. Also, the promissory note can just be an internal document correct? Is there a need for a notery? I’ve found some samples online but can’t tell if they were certified.
First question: what exactly are you borrowing money for, to rehab houses? Is this hard money you’re looking to borrow? When you said flip houses I wasn’t sure if you meant wholesaling or rehabbing.
Just get a plain jane LLC from your state corporation commission. When you get a deal just sign your name as a member of your LLC. Or whatever your title company instructs you to do.
FYI: if you’re looking to rehab may I suggest you get a successful mentor on your side and absolutely learn to buy right (meaning the right price). As a new investor frankly I wouldn’t start out rehabbing…it’s far and away the absolute TOUGHEST way to make a buck in real estate there is.
It’s gonna be a hard money loan, we came across a company, from this website that assists you in the entire process. From the construction to the refinance after…for a price of course, but it seems reasonable.
I think you will contact with a lawyer because he/she know the solution of your problem.