First commercial multifamily under contract - step by step process help
Hey all,

I have a verbally accepted offer on a 8 unit that my broker is writing up the contract for signing today. This is my first commercial multifamily and I have a few questions:

1. Setting up the LLC - when should this be done? Any good resources for quickly setting one up?
2. Earnest money - does this need to come from the LLC, and hence I can't send this until 1 is completed?
3. Bank accounts / credit cards for LLC - similar to above, when should these be opened, and when should we deposit our money into it?

I'll likely post follow up questions once we're under contract. This is a cosmetic value-add (flooring, paint, fixtures, light landscaping, etc) which should yield a good 40%+ increase in rents, which are currently very under market. I have a team for property &amp; project management in place. Curious from those who've done similar projects what the cadence of doing so is, from notifying / removing renters to get in, and then stabilizing.
[{"id": "for7ix7", "text": "You can ink the deal under your name, ISAOA ATIMA and then assign it to your llc.  Talk to your lender about it.", "replies": [{"id": "fork6gx", "text": "It is common here if Florida for a commercial contract to have language that says something to the effect of, \"This contract is assignable to a related entity and is otherwise unassignable\", so the the Buyer can do exactly as suggested above.", "replies": [], "depth": 2}], "depth": 1}, {"id": "for7mf4", "text": "Make sure your PSA allows for you to assign the contract to a wholly owned (or buyer controlled) entity.\n\n1. LLC - get this moving once under contract. Depends on your state, I just do it myself on state websites, others choose a filer and registered agent like CT Corp. \n2. I typically send EM from my personal acct or development S corp depending on which will own the LLC. credit it as a capital contribution when writing the LLC organizing documents.\n3. Bank accounts - soon after forming LLC. Some banks will give you a business credit card without a hard credit pull if you're opening it same time as business checking. Ask banker about that. Deposit money sufficiently in advance so you can wire to title company day before closing. That could be same day if transfer is in the same bank, up to a week if by check from another bank. Ask the banker.\n4. Get insurance quotes going now. Commercial quotes can take longer, especially if the building has something funky going on. Want to get both hazard and liability set up in advance of closing.\n\nCongrats and best of luck with the project!", "replies": [{"id": "forb6uj", "text": "This is great info, thank you!  \nRegarding insurance, is this state-specific like residential? Do you recommend any good multifamily insurance co's?", "replies": [{"id": "fordms3", "text": "yes state-specific. Sorry I don't have any MF but I bet others can chime in here.", "replies": [], "depth": 3}, {"id": "foremp9", "text": "I\u2019d recommend a broker I\u2019ve used prime based out of New Jersey and have had good results I can make the referral if you\u2019d like.", "replies": [{"id": "fosm7gm", "text": "Yup that advise is spot on, find a broker who can shop various insurance companies. One thing specific to looking for insurance policies for MF... do not use multiple brokers at the same time. The insurers frown upon that (when they receive multiple requests for quotes for the same building) and it can make your insurance broker miffed / look bad.", "replies": [{"id": "fosnpex", "text": "This is also great advice, I really appreciate it!  \n\n\nDo residential brokers differ from commercial brokers and their ability to get the best deal? I reached out to the insurance broker I used on my last 4 unit purchase, may need to find someone else", "replies": [], "depth": 5}], "depth": 4}, {"id": "fowi0e5", "text": "Awesome! The property is in MI - any idea if he covers that state?", "replies": [{"id": "fowi8ek", "text": "I think so.", "replies": [], "depth": 5}], "depth": 4}, {"id": "fp66bq1", "text": "Could I also get introduced to your broker? I'm in NJ as well :D", "replies": [{"id": "fp67sqh", "text": "Sure DM me", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "fouw4xp", "text": "Berkshire Hathaway Guard generally has the lowest quotes everytime. You need to work with more than one insurance broker. Insurance brokers can't write with every company. So if you want to see all companies you need to call more than one broker.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fos8k8b", "text": "Your buying in this confused , uncertain environment is the single biggest mistake you can make. Prices are sure to drop . Serious question , what makes you think it\u2019s a good time to buy ? Is it FOMO ? What are you seeing in this deal that make it a must do ?", "replies": [{"id": "fosa9t2", "text": "Lol nobody knows what prices are going to do.", "replies": [{"id": "foshvzq", "text": "Would you agree that its ALOT more likely  that prices will go south ?", "replies": [{"id": "fosjztr", "text": "No.  It depends how long this lasts.  Multi family is already hyper competitive.  Retail cap rates? Yea I think they probably will go higher.\n\nEdit", "replies": [{"id": "foskr6c", "text": "Existing rents on MF will have to come down . Most ,if not all new/newer constructed MF have all been underwritten with current market rates and presumed growth. Retail is dead meat. What do u think about NNN single credit tenant deals ?", "replies": [], "depth": 5}, {"id": "fostjsr", "text": "You mean to say retail values I think? Cap rates lower means higher values.", "replies": [{"id": "fostpp0", "text": "I meant higher, yes you\u2019re right.", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "fosao44", "text": "Yea, maybe. However, this is an off market deal I've been working on for months and the price is incredible. I'm absolutely fine with the risk exposure, but thanks for your concern.", "replies": [{"id": "fosicub", "text": "Incredible price based on what you think you will get for rents ? It\u2019s all going down down down. Frankly I couldn\u2019t care less what people decide to do with their $ , I\u2019m just curious to hear the insights of people who are still bullish, all things considered GL hope all works out.", "replies": [{"id": "fosnk01", "text": "\\&gt;It\u2019s all going down down down \n\nYou have a crystal ball I see?", "replies": [{"id": "fosqip2", "text": "No don\u2019t worry . I\u2019m delusional . Your going to be just fine . All is well. I only base my comments on factual numbers which I\u2019m sure are all inaccurate . Best of\nLuck", "replies": [{"id": "fosqp41", "text": "You're\\*\\*\n\nLearn English, guy.", "replies": [{"id": "fosrf3x", "text": "Says the financially illiterate person", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "fosmoma", "text": "OP, I'd ignore the advice of this other post. If you've run your numbers and accounted for the potential risk of buying during COVID, then you should proceed if you think you have a great deal.\n\nThat said, this is your first deal so I'd recommend asking an experienced investor (ideally in your same area) double check your numbers. Feel free to DM me if you want.\n\nAlso, you asked about LLC formation help. The advice here is mostly correctly -- pretty easy for you to set up on your own but if you have multiple owners/LLC members, you probably want to hire an attorney. Assuming you'll continue purchasing in the same area, paying an attorney once to provide guidance and ensure you're setting things up correctly is well worth the money IMO.", "replies": [{"id": "fosralu", "text": "Ignore the other advice ? Do you even have any CRE ownership experience ? How many CRE deals have you don\u2019t in the past 20 yrs ? Serious question", "replies": [{"id": "foth0ko", "text": "I\u2019ve closed over $100M this week across three deals.  You\u2019re wrong.  There are good deals out there right now.", "replies": [], "depth": 5}, {"id": "fovi0ez", "text": "Yikes you're really something. Best of luck with everything", "replies": [{"id": "fow0pzi", "text": "And you naive", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fos9pp8", "text": "You can set up your LLC through LegalZoom if you don\u2019t need it to be complicated based on the ownership structure. The one thing to note is that if you\u2019ve set up the LLC and cancel escrow, you\u2019ll still need to dissolve the LLC and potentially pay the LLC\u2019s income tax. So one option is to wait to set up the entity until you go hard with your deposit. But, ultimately, I\u2019d recommend talking to your tax advisor just to make sure you understand everything that you\u2019re doing &amp; what you should/shouldn\u2019t be doing (such as not commingling assets).", "replies": [], "depth": 1}, {"id": "fot640i", "text": "Not sure why you'd have to go thru Legal Zoom or something to set up an LLC unless the process in other states is a lot different than FL.  My hubby just goes on the Secretary of State website &amp; gets it done in about 20 min.  \n\nI'm surprised no one is mentioning diligence.  I'd have my diligence done before setting up an LLC.  Just put yourself as the buyer on the contract &amp; assign to an LLC later.", "replies": [{"id": "fourxpo", "text": "OP likely doesn\u2019t already have an operating agreement, which LegalZoom, or similar companies, will also provide", "replies": [], "depth": 2}], "depth": 1}, {"id": "fouhsse", "text": "Looks like good advice given already.  The only thing I want to add is that it is important that if your intention is to title the property in the name of the LLC . . . and if the LLC is not yet created . . . make the offer in your name followed by these words \"or assigns\".  i.e. Joe Smith or assigns.  Because you may not want to create LLC until after offer is accepted.  If you already have LLC created, make offer in name of LLC which is then how title work will be done.\n\nThat way you have time to create LLC after offer is accepted . . . and then can do the financing and title work in the name of LLC.   Title companies will not allow offer paper to be in name of individual and title work in name of LLC if the words \"or assigns\" not present.", "replies": [], "depth": 1}, {"id": "fov0t1s", "text": "The LLC should really be set up before you approach banks for financing. Depending on the bank specific processes, the bank may need the LLC tax identification number and a draft of the LLC Agreement either before doing anything, or at least *very early* in the process for underwriting. \n\nRegardless, you can\u2019t open a bank account or credit card without meeting minimum federally required thresholds verifying the LLC structure and ownership. Happy to provide further info on this if you like.", "replies": [{"id": "fov1se9", "text": "Thanks! Very helpful. I'm creating the LLC via LegalZoom and was then going to contact Chase regarding business accounts/ credit cards. What are required thresholds for these? Plan was to start moving money from our personal account to the bank account, but this can only happen after we've got the LLC set up?", "replies": [{"id": "fov9a1w", "text": "Off the top of my head: \n\n* Drivers License / Passport for anyone owning 25% or more, or a \u201cmanaging member\u201d of the LLC\n* Verification of the LLC tax identification number (EIN) from the IRS\n* Verification certificate for the LLC from your state\n* LLC Operating Agreement\n\nRecent changes to banking regulations require banks to ask a series of questions when opening new business accounts, so I\u2019m doubting Chase would/could open a business account under a personal name to conduct business for an entity not created. But I don\u2019t work at Chase, so I\u2019d ask them for their laundry list of required documents. \n\nOne thing to note . . . Go through the lending unit, not the branch, to open the business accounts to avoid duplicating sending your entity info twice. Again, I don\u2019t work at Chase, but that\u2019s how it\u2019s been at every bank I\u2019ve worked at", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fq1d8cr", "text": "We go over this step by step later in this tutorial. \n\nhttps://www.dropbox.com/s/spg375gamhva0yi/zoom_0%28ari%29-LQ.mp4?dl=0", "replies": [], "depth": 1}]