How to avoid transactional funding and deed restrictions without having an LLC up front

Thanks for sharing this awesome information. You just made my day.
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TC
Miami, FL

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Thanks coach, many many thanks, Jim

Thank you!

I do this all the time, works great! Better than a double closing in my opinion.
I have several pre existing sole purpose LLCs that I make offers in. Only because LLCs are so cheap in Colorado. If I were in a state where the costs were high I would wait until I had an accepted offer then create the LLC as you suggest.

One note, when closing in an LLC the title company will require that you provide your operating agreement for that LLC.

Good post!
Michael

is to add a buyer to the contract (when you already have an existing LLC or are purchasing in your own name); close together and deed your interest in the property after closing. There is never any transactional funding using this method either; and you are simply 'selling your interest' in the property after closing; but you have already used the buyer's money to close the transaction.

In CA this has worked particularly well because the banks frown on giving new LLCs acceptances on offers and always want to see an established business making the offer; not a new business. We always have to inclue the AOI/O (articles or incorporation or organization)with our offers. There's always more than one way to skin a cat. Used this method 5 times this year.

The second article mentions the title/escrow company being used as the seller's choice; while it is true, sometimes its good to check out the bank's escrow/title company as I've found a few good title companies that way before making it an issue on the offer. The caveat they use is that you can use your own title company but you as the buyer have to pay the fees instead of the bank. So long as you don't mind paying those fees, then go for your own title company when possible.

Thanks coach,from someone being new all the good advice helps.

Aaron-n-Suzy

For your convenience, here is a list of the registration fees for an LLC (and for a Corporation) in all 50 States. This will give you an idea of what your additional costs will be to use the above strategy.

http://www.incorporatefast.com/filingfee.asp

wow that's awesome:) had to jot this down quickly. Thanks coach for sharing such a great info. I have been looking for something like that. I guess when I contact www.incorporatefast.com they can help form an llc for me here in miami quickly compared to legalzoom.com which I think it more expensive. what do you think?

my favorite quote for today "You are never too old or too young to start investing." -Wendy Patton

We didnt know that we are in the state with the lowest fee's (arkansas) we are going to have to take advantage of this.

Gotta love DGers,this is a fantastic site.

Thank you all.

Aaron-n-Suzy

Thanks TC and Aaron-n-Suzy for your comments, I always hope that the information will provide new ideas and directions.
TC, I've not really checked into the comparative prices for forming an LLC using Incorporatefast or Legalzoom.
The way the strategy works, as described in the articles posted above, you would only be an owner of the LLC for a matter of days or weeks, and it would be a shell LLC with no assets until the day that you sell the LLC (which would also be the date that you divest your interest in the LLC), so the risks are negligible, and it is unnecessary to pay alot for the formation of the LLC, as long as it is legal.
Several years ago, I paid a company quite a lot to establish a really solid LLC, my documents are over 50 pages in length, and very comprehensive. BUT, and this is my point, I now use that as a template for the formation of other LLC's, and I can use a do it yourself approach by simply filling in the blanks appropriately with the new name of an LLC. So you can pay one of these services to provide you with the basic documents, and then use them as your own do it yourself template for any future LLC's, and that will save you the formation costs in the future--all you will pay for are the registration fees.

Great news from Insider's cash on transactional funding:

"Hey guys... We are making a big change starting immediately this week.

We want to differentiate ourselves from the copycats out there and this is the first of numerous things we will be rolling out.

Funding is now 1% with no application fee. (No more $495)

Should be great... Change slides to the attached slides ASAP"

WHOO YAAAAA!!!!

The above comment is REALLY great news. It makes the double close, whether for foreclosed properties, or because you want to maintain your privacy in terms of your profits a lot more viable.
Prior to today, I've been advising investors to plan an extra 6% margin into your deal to cover for additional costs of transactional funding and your closing costs for the additional closing.
Realistically, with the elimination of the $495 application fee, and the drop to 1% of your purchase price on the funding, you should be able to drop that margin to approximately 3%. That can make a huge difference when you are trying to negotiate a low price.
Yet another reason to want to be involved with this program--insider's cash is a huge benefit to your transactions when needed. I have a feeling, based on their statement about other changes, that some additional announcements are coming that we will all be very happy about.

This is good news,it was 2%+495 but what does that make the min now,was 3495 is it lower than 3k?
It would be nice to see the 2yr go to 4-5,maybe do a little buy and hold that would be something to consider.

Great news coach thanks for letting us know.

Aaron

Thanks for sharing the 2 links on how to avoid the non assignable clause with the banks. Now how about I create a LLC before I submit offer and just sell my LLC when it gets accepted? Or should I create the LLC when my offer gets accepted, the thing is in my state it takes about 5 days to receive you LLC after filing so that would probably be too long and bank would want me to put a down payment on the property as soon as it gets accepted.

Some unanswered questions were brought up on the REI Brain site by posters, and now have ME wondering:

"How do you make the offer when using LLC as the buyer to purchase a non-assignable REO? When I make the offer in the name of the address and LLC, do I “sign” as 123 Oak Street LLC or my actual name on the offer?"

AND

"Does the EMD come from my buyer? How would the pof to the REO bank be presented if the contract is in the name of an LLC? My experience is the bank pof as a bank statement in the name of the person or LLC the contract is under. Most REO fixer-uppers are cash offer deals. They don’t accept simple pof letters from transactional funding lenders."

Hmmm. Anyone with experience in this? Because it seems like such a great strategy, it would be a shame to trip up on details …

Another technique which I learnt from Kareng on Dg.com to avoid transactional funding is doing a dry closing. Dry closing cant be done on bank owned properties. it can be done only on standard sales. basically using c money to take of A and B transaction.

Your LLC will have a Member/Manager or owner or president. Depends on the state I believe. In Colorado it is a member/manager. So you sign the name of the LLC BY Fred Jones, Member/Manager
So you make the offer in the name of the LLC with the person authorized to sign signature. When the offer is accepted and you prepare for closing, the title company will require your operating agreement. Among many other things the operating agreement designates who has the authority to sign for the LLC.

The EMD can come from any source. You, your buyer. It does not have to come in the name of the LLC you make the offer in. It should. but it does not have to.

Your POF should be in the name of your LLC.

I use a POF letter from a TF lender on ALL my offers. Never had a rejection from a lender. This POF letter is not A generic letter from some on line TF lender however.

Hope that helps,
Michael

There have been a few questions asked above. Dave, who started this post thread may also have some comments to share, I'll give my take on a couple of these questions.

Aaron-n-Suzy, I just asked my supervisor if we know if there has been a change on the minimum amount with Insider's Cash Transactional Funding, his answer is that we do not know of a change. He said he would check further.

Reynold and Marie both asked about how you make the offer if you plan to buy into an LLC and sell it. You have choices there: 1) Create the LLC in advance and make the offer in the name of the LLC; 2) Make the offer in the name of an uncreated LLC, and when the offer is accepted, immediately register the LLC (you can use the address of the property as the name of the LLC); 3) Make the offer in your own name or the name of your primary LLC, and then amend the offer after acceptance to the new LLC (which would simply be another entity owned by the same owner). Read the first of the two articles supplied by David above, for more information on the second option.

It looks like Michael has addressed most of the other questions thoroughly, thanks Michael.

I repeat again, as I often do, there is so much good information being shared here, kudos to all those who are sharing! I've been at this for 18 years, and I learn something every day from this forum.

There is an old saying that "Knowledge is of two kinds--either you know a thing, or you know how to gain access to it." The second one, in my estimation, is the most powerful, and is what this site provides.

Thank you for finding the answer for me,going that extra mile means a lot.

Thanks coach

Aaron

Thanks very much for these links and to everyone else for expanding on the technique.

Karen

I've not received any additional information, but I promise that anything I do receive will be immediately posted on this thread. While a reduction in the minimums would not make a difference on a large transaction, it would definitely make a difference on any property with less than a $175k purchase price, so cross your fingers and toes, use your juju or prayers or mind powers, and lets hope for a change.