My first house hack!

4 Replies

Hello BP! I am in the process of closing on my first duplex to house hack and I have a few questions as to how to set it up. Can I / should I open a business checking account as an individual and just have my tenant pay the rent there? The mortgage payments, property taxes, insurance, maintenance, and cap ex would all be taken out of there, if so. Also, I talked to an attorney last week to look over my lease and make sure it was legal and I told him about my plans for this business and he suggested I form a C Corporation? Your thoughts on that? Everything I've ever read has said that an LLC was the way to go for both taxes and liability, but I am still learning. Any input is welcomed! Thanks in advance!

@John Dellinger

As your first house hack, I️ don’t think it’s time to form a business entity (especially if you are financing as a primary residence). I’m not a CPA but nothing changes about your tax advantages by forming an entity. You are still privy to the same benefits keeping the duplex in your name.

Alternatively, opening a business account is wise and will keep your business finances separate and easier to track for yourself, accountant, and IRS (if need be).

Thanks for the reply!  That really helps a lot. 

@John Dellinger

Did your Attorney suggest that you reach out to a CPA about the opinion on the structure?
In Indiana - Does a C-Corp offer more liability protection than an LLC?

Normally - you do not want to hold appreciating property(such as real estate) in a C-corp.

1) If the real estate generates a loss - the loss will be stuck with the C-corp as an NOL. You will not be able to offset the loss against the income reported on your personal return.

2) If you decide to transfer the property from the C-Corp to another person or entity - the Corp will be liable to pay tax on the appreciation.

I agree that you should create a separate bank account and have all income and expenses go through there. 

Some may argue that if you have an LLC or C-corp but the property is in your name that you may not even be afforded the protection that you think you have.

Let me know if you have any questions.

Basit Siddiqi, CPA
917-280-8544

@Basit Saddiqi

Yes the attorney suggested I talk to a CPA before setting up an entity, and the CPA suggested I set up an LLC. My assumption is that the lawyer has seen in his clients better asset protection by keeping the C Corp income seperate from personal income? I'm not sure.

I am meeting with him on Monday to form an LLC, but am already in the process of closing on my duplex, so I think it may be too late to put the property into it.

Should I open a business checking account as a sole proprietor and just have the rent deposited there?  Then all my properties from here on out would be bought in LLCs. 

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