I am about to purchase my first investment property. It's a small SFR that my parents are going to rent from me.
I heard a while back that it was best to create a new business entity for every property you purchase for the purpose of (I believe) liability issues.
Is there truth to that? Or does it not apply in my situation? Any thoughts?
So, this topic seems to go round and round on the forum. I'm not a lawyer, first thing to do is talk to one if you are seriously considering using a LLC/business entity.
Here are a few things I know from research & experience.
-Its pretty tough to buy a SFR straight to LLC if you are financing it. You can grant deed it to a LLC after purchase, but this could trigger the due on sale clause.
-LLC is a good way to legally protect your self by limiting your liability, however, depending on your state, if you are a single owner LLC you might not have a whole lot of protections.
-We have shifted over to buying properties directly into LLC, however, we have to use commercial loans and our loans all encompass at least 5 units (5 units & 16 units).
-Are you really worried about your parents taking your to court?
-We use LLC to make business management easier & to keep the business relationship between my business partner & myself separate from our personal relationship.
Hope this helps some. Just my thoughts.