I'm hoping to close a deal on two rental properties before the years end in baltimore md. What's the best way to setup a LLC when you have more than one property? My plan is to buy 1-2 properties every 6mos. Do I do an LLC for each property or have one holding LLC?
Thanks in advance
1 or 2 every six months? Very nice! I am jealous. Still scrambling to try to find a way to get my first...lol.
I have been looking at places all over Baltimore to learn the areas and get a feel for it. Been having a fun time actually :)
You'll get varying answers to this question. My suggestion to you is to speak with an attorney on the matter. If you'd like a recommendation, feel free to shoot me a PM.
I am interested to see what others say. After you gain at least 4-5 properties, I would recommend meeting with an attorney that specializes in REI. You want to make sure at that point that you are covering all of your bases.
All my best!
Just remember, more LLCs=more paperwork & tax prep. I personally don't see much value in doing 1 property per LLC. I'd talk to an attorney before you get too far into it.
@Clayton Ballard Most banks wont lend to an LLC. If you want to leverage funds, you are better off keeping the properties in your name and going for conventional mortgage. You can buy umbrella insurance to protect your assets.
In MD and LLC cost $300 a year in what they call personal property tax. Add to the cost of separate bank accounts and books and $500 for an accountant per LLC and It could cost you $1000 a year in administrative costs per LLC.
Personally I put multiple propertis in an LLC. At some point you may choose to do a second LLC to segment your liability. Where that number is, is personal choice.
Remember and LLC is not you first line of defense against liability risk. It is you last defense and an imperfect one at that.
Ned Carey, Crab Properties LLC | http://baltimorerealestateinvestingblog.com/
I am a newbie here and would like to see others thoughts as well. I have just been educating myself first before I make a big move but I am really ready to start in real estate investing. I spoke with my accountant yesterday who handles my accounting and taxes for my current business (has nothing to do with real estate) regarding this same question whom supposedly has experience in real estate investing himself. This was his response:
1.Do not set up holding company.
2.Purchasing a house to fix up and rent will be based on your personal credit anyhow, so just go with qualifying that way. If you plan to have an outside partner, that changes everything.
3.Some banks want the real estate in an LLC, some don't, some don't care. Won't matter for tax purposes. When you get close to buying a property, you'll need to know if bank wants it or not. Ultimately, you want property in LLC for liability protection, but won't matter for tax purposes.
4.Just move forward with identifying properties you want to buy, and finding bank to qualify you.
He recommended to get a personal loan and buy the investment house personally. Then, after you've done that, you'll transfer the deed to an LLC but the loan remains in your name.
I agree with the above posts. Focus your efforts on buying the right properties at the right price and finding a lender to work with you.
You will have some liablity protection with your insurance policy and you can purchase umbrella policies if you want added some added insurance. There are costs associated with forming an LLC. The lender will not base their decision to lend to you based upon LLC or no LLC.
Clayton we have multiple properties all under the same LLC I haven't come across a bank that won't lend to an LLC but I'm using commercial revolving loans to buy then refinancing into mortgages at 70% of the ARV after purchasing. I also use smaller local banks for funding since they can make their own decisions locally. It just depends on your circumstances. Every case is different and so are most lenders on their preferences.
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