I have searched for answers to this question, but unfortunately have not found one, so I am hoping some investors, CPAs, and attorneys can chime in!
I am a new real estate investor. I am planning on starting with fix and flips and fix and rent. After searching the forums and talking to a CPA I have decided to register two entities - one for the flipping side and one for the rental side.
1) XYZ Flips, LLC
2) XYZ Rentals, LLC
But I only want one name to be known to the public. For example, I only want to brand one business, have one website, one email domain, one email signature, etc. This company would be called XYZ Properties, LLC.
My questions are:
- What would be the best way to setup the entities to accommodate this? Of course I want to make the decision that provides liability protection for each entity from the others and results in the greatest tax advantage.
- Should XYZ Properties, LLC be setup as a parent company/owner for XYZ Flips, LLC and XYZ Rentals, LLC ?
- Should all three LLCs be setup separately and XYZ Properties, LLC be listed as the DBA name/trade name for XYZ Flips and XYZ Rentals (not sure if this is even possible)?
- Any other other/better ways to handle this?
I am not a cpa or an attorney, but I can tell you that I never ended up forming an entity before I bought my first rental. There are tons of great articles on BP about this, and all of the attorneys will tell you to set up LLC's, etc. The problem is, if you are buying your rental with conventional financing, you will not be able to hold title in the LLC. Most investors I know have bought umbrella policies to account for this added risk. Again, I am not an attorney, but I ended up deciding to wait on getting more "asset protection" until I actually had some assets to worry about!
Hi @John Warren !
Thank you for sharing! Yes, I read on BP about issues getting a conventional loan under an LLC and I asked a Bank of America representative who confirmed they will not issue a conventional loan to an LLC. Right now, I'm really trying to focus on flipping (despite the tempting rental opportunities coming my way) so that I can save some cash to use for buying rehab rentals in the future, but when I start to focus more on rentals I will certainly look into purchasing an umbrella policy.
Hi @Dani Beit-Or !
Thanks for replying to my post.
I ended up setting up one LLC for flipping and one LLC for rentals and they both fall under one trade name.
I'm focusing on flipping right now. I have been putting in offers, but haven't purchased my first deal just yet. Trying to buy my first property before the end of the year, though! :)
How do you purchase your properties - under an LLC, under your name, etc?