LLC for a Long Term Investment?

Question

Hi! I am thinking about buying a few parcels (in other state) and... do NOTHING with them for next ~10 years (so no income, minimal annual expenses). Then, depending on the situation, I would either sell, build houses and sell them, and/or build a house for myself on one of them.

I was wondering if this would be a good case for LCC? I would like to separate my day-to-day life (W2 employee) and real estate investments.

Any thoughts?

Thank you,Ronald

Hoa Nguyen · Answer

Generally speaking, it's always good to do any business under an LLC. That way if that land defaults or an issue pops up where (god forbid) you cant pay on that land, you aren't fully liable and your personal assets won't be affected for the most part.

Account Closed · Answer

@Ronald Roetsel As Hoa mentioned, an LLC is a great way to protect potential liability on your personal assets. While the paperwork can be a pain, it is something you could do on your own with a little research into the matter but an attorney wouldn't be that expensive to set you up with it for peace of mind. Although unlikely, if someone was to get hurt on those properties, even if they weren't supposed to be there, the LLC would help to shield your personal assets.

Peter Mckernan · Answer

Hey @Ronald Roetsel good question (disclaimer I am not a CPA or attorney, and you should ask one), my suggestion on this is that it is okay to just put that under your trust (if you have one), or in your own name. The reason for this is due to you owning the properties for 10+ years without doing anything with them, they are not generating income and not having really any liability. The cons, paying the money for the LLC(s) each year for them with no income (losses for 10 years), and not having huge liability on the land like a house that people live in that could get hurt at and sue you.

The LLC is for protection of assets on you so that if someone sues the LLC they are only suing the LLC not all your other stuff, so the caveat is if these are worth 100K+ and then the person can come sue you to take these from you. If they are smaller amounts of money, throw it in a trust or your name and get an umbrella policy until you build on them or start generating income on them. The last pro to an LLC is that if you are a business generating income on it, let's say $10,000 a month, well now it's a K1 taxable income not a personal income which will save you some of taxes at that point if you generate the income on them.

Ronald Roetsel · Answer

Thank you both!

A few more questions (I realize this may be OT for this group but I would ask anyway as this may be obvious for you).

1. Wouldn't I have any problems with IRS if LLC doesn't generate any revenue for years?

2. How about an opposite case? I have financial problems in my personal life (e.g. I die, leaving millions in medical bills declined by my insurance company). As I am the breadwinner, and let's say the LLC was registered on me, OR my wife, OR anonymous, she can lose the assets "owned" by the LLC?

3. Can a single LLC provide multiple, unrelated services? For example (fictitious) - can my future LLC (a) acquire properties (as above), (b) provide consulting services, and (c) offering commercial cleaning?

Thanks again!

Ronald

Ronald Roetsel · Answer

Ronald

Gary Nash · Answer

I agree with Hoa Nguyen, protection in this day is always a good thing.  On another note, you do realize any house left unattended for lengthy periods will expose you to a multitude of problems, for example:

• Mold, rodents, insect infestation is almost certain
• Carpetbaggers, homeless, and or drug addicts may become a problem that could ultimately be your responsibility
• What is the city ordinance? You may be responsible for yard care, trash, and water.
• If there is no water, the city may condemn the house, prove the house to be a nuisance, and order it to be removed, all of which will be on your ticket.

LLC for a Long Term Investment?

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