9 Reasons Why a Delaware LLC is Preferred | Investment Real Estate LLC
- There are opinions when it comes to a best state to form your investment real estate LLC.
- When looking for commercial lenders, often they require borrowers to form a Delaware LLC.
- The advantages on why a Delaware LLC for investment real estate is clear.
- This blog is not to engage in legal or accounting advice.
- Just some reasons why some commercial lenders prefer a Delaware LLC.
Investment Real Estate LLC Mortgages
- When debt-to-income is too high for investment properties, there are debt-service coverage loans.
- Debt-service coverage loans go off of the cash flow of a property.
- Calculating debt-service coverage (DSR) is as easy as:
- Adding principal, interest, taxes, insurance, and home owners association dues.
- Dividing it by the projected rent of the subject property.
- Programs go up to 100% debt-service coverage.
- Fix and flip loans are for real estate investors looking to buy and rehab a property to sell or hold.
- New construction loans are similar to fix and flip loans.
- Line of credits are available for both fix and flip and new construction loans.
Benefits – Why a Delaware LLC
- Delaware General Corporation Law
- Delaware is generally considered pro-business
- Delaware keeping business laws up to date
- The technology, easy access to services, and information stored electronically
- For tax purposes
- Delaware’s reputation to corporate law
- The attitude towards corporation law
- The efficiency of the law
- Start up costs
- Annual fees and maintenance
Forming a Delaware LLC for an Investment Real Estate LLC
- Once ready to form an LLC, a company can be paid to set up a Delaware LLC.
- Can set one up on your own through the division of online services for Delaware.
- Can follow the how to form on Delaware’s corporation website.
- Only some commercial investors prefer a Delaware LLC.
Common Corporation Documents for Investment Real Estate LLC Mortgages
- Articles of organization
- Also known as the certificate of formation
- Typically contains: LLC name, member’s and manager’s information, registered agent’s information
- Operation agreement
- Outlines the ownership and members duties
- Form W-9
- Company organization chart
- Often explains any organization ownership in the company
- Foreign qualification documents for the LLC if applicable