Establishing an Entity

[Derrick Harper]

I am looking to purchase my first real estate investment property. I am at a lost in determining if I should establish an entity and purchase homes under it, or acquire them personally. Does anyone have any pros and cons concerning this delimma?

[Lucas P.]

Originally posted by @Rick Pozos:

I would first worry about getting a deal done. An entity should be something that you start to think about after you have done a couple of deals. Focus on the property, ARV, repairs needed, contractors, and marketing strategy to sell. You already have enough to worry about without having to worry about entities.

With that said, yes it is a good idea to have an LLC or a C-corp, but you have to have money to set them up. It is good protection to have and I highly recommend them to everyone. I guess just not right off the bat. You do need to protect yourself from this litigious society that we live in. An attorney get get these set up for you, usually about $1,000-$2,000 for each entitly.

 Sorry to be negative, but that's bad advice.

1. It should cost you under $1k to setup an LLC

2. You could get sued from the first property deal you do, and you and all your assets are at risk. Why take that chance?

3. If you are going to do something, do it right and don't cut corners. It may seem like you just want to get started and don't want the extra expense and can wait, but it's a necessary evil. If you don't have the cash to set your LLC up from the start, maybe you aren't ready to start.

I think any attorney would give you the same advice.