What is the best plan you hold rental properties?

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What is the best plan you hold rental properties?

Will Jones
Investor · Hawthorne, NJ · Member since 2016 · 19 posts · 1 vote

I'm buying rental properties in NC. I was wondering if there is a preferred way to run them. Weather it be by llc each one? Keeping them in your name? Tax reasons as well . Any pros and cons would be greatly appreciated. Thanks

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Michael Bertsch
Bossier City, LA · Member since 2015 · 122 posts · 50 votes
9y
This subject has been talked about extensively on here. If you search this, you will find all kinds of good info. Me personally, I don't use an LLC for my conventional financed properties. Fannie and Freddie will not allow you to finance through LLC. If you transfer title to LLC after closure, you are at risk for the due on sale clause. It's not worth losing your low interest 30 year loan. Tax wise LLC are pass through entities. There are no real tax benefits for LLC. You get the same tax treatment having it in your name. In some states the annual fees for having an LLC are up to$800 a year. If you are sued, most good attorneys can pierce the corporate vail of and LLC very easily. Just one slip up with commingling personal and business and it's done. I usually max out liability coverage on my properties and get an umbrella policy. The main thing is to not overanalyze. Get out there and make some deals happen. Good luck with everything.
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  • Michael Bertsch
    Bossier City, LA · Member since 2015 · 122 posts · 50 votes
    9y
    This subject has been talked about extensively on here. If you search this, you will find all kinds of good info. Me personally, I don't use an LLC for my conventional financed properties. Fannie and Freddie will not allow you to finance through LLC. If you transfer title to LLC after closure, you are at risk for the due on sale clause. It's not worth losing your low interest 30 year loan. Tax wise LLC are pass through entities. There are no real tax benefits for LLC. You get the same tax treatment having it in your name. In some states the annual fees for having an LLC are up to$800 a year. If you are sued, most good attorneys can pierce the corporate vail of and LLC very easily. Just one slip up with commingling personal and business and it's done. I usually max out liability coverage on my properties and get an umbrella policy. The main thing is to not overanalyze. Get out there and make some deals happen. Good luck with everything.
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  • Kenneth GarrettPro Member
    Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
    9y

    Will,

    The LLC is the best way to hold rental units. You must run it like a business no comingling funds. By having an established business you get all the advantages of tax write-offs, depreciation and asset protection. The LLC advantage is asset protection it is not necessary tax advantages although there are some.

    The idea is to separate yourself from your business in case there is a lawsuit. Putting assets in your name exposes you to any current assets. You can have multiple properties in the same LLC it depends on the equity. If there is not much equity then there is not much risk. If your state allows series LLC then you are given additional asset protection with one LLC and baby LLC's within the master. Go to youtube and look up Mark Kohler on LLC advantages. Mark does a weekly podcast and he is a CPA and attorney and is a wealth of information. His firm represents clients in all 50 states. I have used mark in the past.

    Good Luck.     

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  • Will Jones
    OP
    Investor · Hawthorne, NJ · Member since 2016 · 19 posts · 1 vote
    9y

    Thanks Michael B.  I've heard about the liability insurance.   I think it's a smart move . But I do also agree with Kenneth garret .  My concern is more of an asset protection.  Definitely going to look up Mark Kohler on YouTube. Thank you guys for the feedback.

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  • Daniel HymanBusiness Member
    CPA · Milwaukee, WI · Member since 2016 · 2k+ posts · 1k+ votes
    9y

    @Will Jones 

    I recommend getting with an attorney who can consult you on your individual situation. Just keep in mind that that LLC's have annual fees associated with them (aside from the initial registration fee). I think it's $200/year in North Carolina. Depending on how much you anticipate growing your portfolio, those fees could be significant. An attorney can help you weigh that against the asset protections issues.

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