Due to slow process of obtaining more investment properties. Is it okay to use my real estate LLC to do renovation and/or flip projects? Do I need to have a separate LLC for different different purposes.
Thank you in advance BP Community for all your advice.
You can. It's definitely cleaner to do a different LLC for every deal, but that becomes a huge hassle if you're flipping a lot of properties. They're a lot more common for larger deals
Fun fact: some lenders with nice terms require a distinct LLC be formed for the project
You will be fine with one LLC. If you get into a situation where different projects have different partners set up separate entities. If its just you its all your money anyways.
Just a side note, when flipping houses its not a good financial move to use an LLC. For tax purposes you are better off w an S-Corp. As an example (somplified) if your LLC has $100K in net income you would pay 15% SE tax on the entire $100K and 35% income tax. You would be left with roughly $50K. With an S-Corp you could take a $30K salary for the year and pay 15% SS tax on your salary. You would pay 35% income tax on your salary and the $70K distribution. Your tax liability is now only $39,500 leaving you with $60,500. The LLC cost you $10,500 more than the S-Corp.
I greatly appreciate all of your advice and time to respond.
Rob: Thank you so much for the extra input. When we decide to do a flip, I will definitely look into setting up an S-Corp.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing