Forming LLCs for a Duplex House Hack

[Edward Stephens]

Dear BP Community,

I am buying both units of a duplex, leasing one unit to someone else and living in the other. I’m taking a hardship withdrawal from my 401(k) to fund the purchase. Any comments regarding my decision to use my 401(k) to finance the purchase should be directed here. The details of the deal can be found here. If the deal goes through, I will inherit a tenant from the previous owner.

I am in the process of forming an LLC (we'll call it LLC #1) to hold the property's title. I will also be forming another LLC (we'll call it LLC #2) to act as the property manager.

Question 1: Is it possible to transfer title from me to LLC #1 a few days after closing, or am I disqualified from doing that because of my situation (see above links)?

Questions 2: What important aspects am I not considering?  (I don't know what I don't know.)

Question 3: What are the advantages and disadvantages of forming two LLCs to accomplish the objectives I’ve stated above?

Let me know if this post is unclear or if you need more information. I will read every reply and will try my best to respond to them all. Thanks in advance.