When to LLC or not to LLC

7 Replies

Cart before the horse... chicken or the egg?

I am about to conduct my first deal. It will become a rental. I know at some point I will want to place properties in an LLC to limit my exposure. But....when and how. Step one - buy with private $ in my name, rehab, refinance into convention loan, what's the next step, how does it get to an LLC without creating a commercial loan?

This is like the eternal chicken-egg question on Bigger Pockets... what it seems like most people advise is that if you don’t have a ton of assets at first, it isn’t necessary to go to the trouble of getting an LLC until you own a lot of assets outright and you’re worried about someone going after them... also as you point out, if it has a mortgage it will be difficult to put it in an LLC. Probably you want to get a good insurance policy to protect yourself and LLC’s can come later... but it depends on your situation, what your accountant says, etc.

thank you very much. I am considering a VBRO for my first property. I was concerned about how to structure myself for this operation. 

Hi, I’m really new and wanted to know what a VBRO is? Also, can you start with an llc and get financing through the llc to buy homes, like a loan or something? And why not commercial loans?

Thanks!

Hi Kimberly ! Episode 196 of the podcast is great for this topic on when to create an LLC. Good luck !!

@Kimberly A Hall my advice is to find a good CPA that owns properties and ask which you should do based on your tax bracket and implications. Our CPA has saved us thousands in taxes with Uncle Sam. The CPA is an integral part of any investors real estate team.

Than you Rachel, that was a great explanation and the first clarity i have had on the subject.   Jennifer, a VBRO is Vacation Rental By Owner, check out VBRO.com. Thank you David, I’ll check it out. Thanks jack, i am on the hunt For a CPA next.

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