New Opportunities at Console Matison and Should I Put My Pennsylvania Real Estate Into an LLC or Buy It Myself?
If you follow my blog or know me in the real world as a person, you know that I am an attorney in Pennsylvania and New Jersey and I primarily work on items related to real estate law. As of January 1, 2017 I partnered with (former) biglaw attorney and personal friend Scott Matison, to expand Console Legal into Console Matison LLP. Scott focuses on family law matters and I handle the real estate and business law end of things. We think there is tremendous synergy in our practices, and ultimately the partnership made perfect sense.
Historically, I’ve focused on serving clients in Philadelphia, but we recently opened an office in Media out here in beautiful Delaware County. We believe that there is a great opportunity for us to connect with the same caliber of real estate investors that we have as clients in the Philly region. Delaware County is happening right now, and we wanted to build a presence out there to serve, not just the proverbial DelCo real estate client, but also clients from surrounding counties who might not want the hassle of traveling into Philadelphia to see their lawyer. We moved into a beautiful, modern office at Pando Professional Marketplace, located at 1 West Third Street (the corner of 3rd and Jackson Streets), where the building’s focus is on leasing to businesses that service the real estate sector. We invite everyone to come visit us at our new location and let us buy you a coffee from our slick coffee machine.
Quickly, today I wanted to touch on a topic that comes up a lot, like every single day I’m in the office: I’m a real estate investor, or I want to become one…Should I buy my real estate investment property in an LLC, or what?
You have the option when you buy an investment property, to title it in your name personally, similarly to how you bought your primary residence, or you can title it in the name of some kind of entity; for example an LLC.
There are considerations that weigh on the initial decision. The first decision that will create a barrier to entry is financing. Do you need a loan to buy the property, and if so, does your entity have any chance of being lent the money? Speak to your lender. If the answer is a clear “no,” then you’re not left with much choice than to put the property into your own name. If the answer is yes, then consider an entity to hold property title. What we see at Console Matison is that most lenders will tell you that lending money to an LLC is quite difficult, and so because of that, most folks quit on the idea and inadvertently put themselves at risk. There are other options to get your LLC some money to purchase real estate, and they will be the subject of a future blog.
Outside of the financing concerns mentioned above, the pros of purchasing under you own name are easy to grasp. First, there are legal and filing fees (initial and yearly) associated with creating an entity, that you won’t have when using your personal name to buy real estate. Your accountant might also cost you more each year on account of the extra work associated with your company’s filings. Secondly, insurance purchased under an entity name is typically more pricey vs. buying it under your own name.
However, the luxuries that a real estate entity affords you is anonymity and liability protection. You can both conceal yourself as the benefactor of a piece of real estate and you create a wall of corporate protection that can help insulate you personally from any issues that might arise because of the property. Also, if you have an LLC, you can move investors in and out of the company with flexibility, not having to worry about changing legal title.
There are other factors that should be considered and if you are in Pennsylvania or New Jersey and want to chat about this topic or anything else related to real estate, my number is below.