LLC

[Ayana Young]

I am new to REI and is curious if the first step is to set up a LLC?

[Mike Scott-Smith]

I have this question on my mind as well. I have learned enough to get myself in trouble. Here is what I think I know.

Forming an LLC provides you with some protections between your personal property and your investment properties. This is not to say that you are fully protected. It shall limit your exposure to lawsuits significantly. This is a topic that I will be engaging with an attorney in the near future.

I have spoken with my broker, who sort gave me some of his background with his investment properties. He informed me that he has been personally backing properties via the mortgages that he holds. He then quit claim deeds the property to his LLC. I am not yet certain if this is the best approach. However, I have another friend that owns property here in Sarasota and has all properties in an LLC. The difference between the two are that one has the ability to purchase property with a 20% downpayment (broker) and the other has to go with loans that require 25% down with a 15 year note.

I have also read that some folks form and umbrella LLC and then put all properties beneath in their own LLC. Example...Your Name LLC at the top, 1111 Property Address LLC, 2222 Property Address LLC. I am under the impression that each property is isolated to some degree.

Of course these are all best discussed with an attorney, or similar. I plan on forming an LLC at some point, I am just not sure when it will be.

Hope this helps.