Should I get an LLC?

4 Replies

Hey everyone need some quick advice. I have one rental property currently and I am looking to go for another soon. Is an LLC recommended? If so when? And what are the main benefits of it? Thanks!!

Nick

@NIcholas Hamel all of the attorneys will immediately chime in that you should get an LLC for asset protection. You will find a lot of articles and forum posts about this on BP, but the reality is the LLC just limits your liability so that the worst case scenario is that you will only lose the assets in the LLC (not your personal property, money, etc). Most of the posts tell you to get an umbrella policy (great idea either way as they are cheap), and get an LLC when you have a lot of assets.

I am not an attorney, but I can tell you that as you scale up you will organically start to feel the need for more asset protection. Your team should guide you in this. No one investor can be on top of the asset protection, insurance, management, construction, etc. You will be good at some things and will lean on others for the rest.

@NIcholas Hamel - If you are new to REI, you should be primarily concerned with finding good deals and growing your business first. I would not suggest to look into establishing LLCs and asset protection strategies till you have at least $100-300K in equity and only after you covered properly the "other" aspects of risk management (insurance, umbrella insurance, proper property management, etc.).

Here are some diagrams to help you on this quest:

All the domains that need to be aligned/intersect for asset protection diagram:https://www.biggerpockets.com/files/user/CosIorg/file/asset-protection-spectrum-diagram - What is needed for a complete asset protection OR the domains that need to be intersected to find asset protection.


Diagram: https://www.biggerpockets.com/files/user/CosIorg/file/asspro-onion-diagram - The layers of asset protection - what, when and cost.

Decisions Flow Diagram: https://www.biggerpockets.com/files/user/CosIorg/file/asspro-cya-diagram-v6a-solo-401k

Diagram: https://www.biggerpockets.com/files/user/CosIorg/file/asset-protection-structures - How a fully implemented asset protection layout might look.

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