A real estate holding company stands as an entity that helps the business owner avoid the risks of owning investment properties. It is also known as Limited Liability Companies or LLC. These companies don’t participate in business operations but own various assets. Now, it’s not hard to start a holding company. The process is quite simple, as I described:
Follow these six steps to start your own holding company:
Step-1: Form LLC
You have to make the LLC, which you are going to place all your properties. Now, choosing a name is a part of the process that is important for the holding company of yours. However, you have to register the name with your own state and make sure to record it with IRS and must take an EIN (Employee Identification Number).
Step-2: Open Separate Checking Accounts
You must always keep in mind to open separate accounts on the bank. One is a personal account, and another is a business checking account. It is important and will help you a lot. A personal account will be for personal transactions, and a business account will be for business-related transactions.
Step-3: Get Professional Help
What I mean is to hire professional peoples to assist you in your work so that you can save your time and limit your liability too. Those peoples will be very useful for you because they are working these sorts of works for many years and know what needs to be done.
Step-4: Find Property and Make a Contract
Your main purpose for making this holding company would be staying safe and protecting your assets and properties. Now, it is significant to know how you can catch and buy the asset. You are required to find those sorts of properties that will fit your asset’s budget and goals.
Step-5: Consider Secure Financing
You are pre-approved; now, the thing you need is to complete the lender’s application procedure. During that process, the lender is going to bring out underwriting, on that part, where lenders are going to find the info on your loan request along with its supporting documents, which are:
- Purchase contract.
- Whole mortgage application.
- Property details.
- Rent roll, copies of leases.
- List of current assets and liabilities.
- Certification that shows where the down-payment of yours is coming (also known as a gift letter).
They are going to confirm the property info and instruction an assessment that you have to pay, which would be $300-$500. Further, a request fee is a cost that the lender is going to charge too.
Finally, the property shifts names, and the new landlord takes the keys of that property, which some called settlement. Generally, it takes some time that is 60-90 minutes, and lead a title company or on the office of a real estate agent.
It is a good thing that you are going to start your own holding company that will provide you the best advantage, which is limited liability and professionalism. But, it would be hard to manage some things like annual costs, financing costs, etc.