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Reasonable legal fees to set up an LLC for real estate investing?

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  • #16
    Tim Personal guarantee for a loan to purchase property in a LLC should be the last option in my opinion. This would defeat the purpose of liability protection and privacy of purchasing under a LLC. It's better to raise cash and start small. Once the LLC has enough income and assets under its belt, it can have its own line of credit and guarantee its own loan”.
    Just a point, not sure of ANY lender that will do this for an individual in real estate. Might be, but curious if you have any sources.
    The negotiating point is avoid broad “cross collateral” clauses. Keep it to the specific debt and asset being used as collateral. That forces any lender focus on the loan and asset and then request you honor your guarantee.
    Real estate loans aren’t business loans loaded with affirmative and negative covenants. That is a completely different loan. Legal structures are extremely important from both a tax and risk management. A lender will need audited financials( you can get by with a review) of the entity responsible for the loan. Under the business loan, the entity has a preapproved limit for secured and unsecured borrowing. An LLC in and of itself rarely reaches that level. The members are the deep pockets. Realistically one is talking at least a private office setup. Audits and financial reviews are much more expensive than tax prep or planning.

    FMR LLC comes to mind. They use LLC structures.
    I am sure Abby Johnson doesn’t personally guarantee much of anything. Lenders aren’t willing to accept losses for liabilities, in this case asset protection.
    Umbrella insurance is the way to go for asset protection. Personal or LLC.

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