LLC and Out of State Rental Properties

[Jacob Prelle]

Hi All, 

I'd love some help answering two questions:

1. Is it wise to open an LLC for every property purchased?

2. We have no experience being landlords or owners. If able, we'd like to purchase rental properties out of state to obtain better deals. So far, research has indicated that turn-key properties that already have management in place are best for beginners. Where should we focus our learning and research to best prepare for being beginner out of state owners?

Thanks,

Jacob and Rachel

[David Faulkner]

1. No, do not start an LLC for every property. Each LLC will cost you $800/yr CA state franchise fees + setup fees + maintenance/bookkeeping fees + extra tax prep fees. Get an umbrella insurance policy and buy them in your name.

2. Man, this is some seriously backward logic IMO, Jacob. What makes you think that turn key out of state is where and how you will find better deals? Cheaper does NOT automatically equal a better deal. Turn key companies are in the business of buying distressed properties at a discount and reselling them to (mostly out of state) "investors" ... by the time you get the property, a wholesaler, contractors, real estate agents, the turnkey company, the hard money lender, out of state marketers, and the PM have already gotten or will get paid on the deal ... that is a lot of middle men getting paid, and who do you suppose pays for all those markups? How is it again that you are getting a good deal by paying full blown retail (or often above retail price)? It is MUCH easier to find a great deal, and learn the business hands on in your local market, where you can cut out many of the middle men and maintain control over your investments. Yes there are many selling those products that will say that they are best for beginners, but it is just not so IMO ...