Starting out - need advice

4 Replies

So my wife and I have made the decision to start a real estate investing company. I have done tons of research and so excited to get started. I have a few questions below, please give me some feedback !

1. Is it a smart time to buy a property

2. Is there a certain % of equity I should try to obtain right off the bat to mitigate risk.

3. I'm thinking of starting the business the LLC route. Does anyone have another view as to why LLC isn't the best route ?

@Shane R Williamson 25% equity is a good balance. Many people on here use more leverage but 75% LTV will get you the best rates and give you cushion on your cash flow.

The LLC doesn't really impact your tax deductions but will result in higher interest rate and insurance if you are buying 1-4 unit rentals. Also some administrative costs such as annual filling fees, etc. Talk to your CPA, lawyer and insurance agent for advice if the cost benefit is right for you.

Christian Stoecklein

Cody,

There are thousands of posts on whether or not to put your property in an LLC. From an insurance standpoint, more companies will allow for an LLC on a Personal Form (Dwelling Fire aka Landlord policy) so the cost differential will not likely be a factor. The LLC will distance the Liability from you but the veil of the LLC can be pierced in certain situations (talk to your attorney about that). I think that the more Insurance coverage in place under the LLC will make it less likely they will try to break through.

Whether or not you own in your name or an LLC you should consider getting the umbrella policy. The umbrella provides coverage if the limits of the underlying policies (Homeowner, Auto, Dwelling Fire, Boat, etc.) are exhausted in a claim. If you title the rental property in an LLC look for an Umbrella that will cover over both your personal policies and the Dwelling Fire policy on the LLC.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

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.

We hate spam just as much as you