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Updated over 7 years ago on . Most recent reply

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Mo S.
  • Real Estate Investor
  • Houston, TX
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LLC now or after first flip?

Mo S.
  • Real Estate Investor
  • Houston, TX
Posted

I'm currently looking for my first flip and have received conflicting advice from some of the local investors I've spoken to. Some say it is better to get your feet wet and go through the first flip from start to finish before setting up an LLC while others say to set it up beforehand.

I will personally be investing $75K into the venture and my father is willing to invest an additional $100K in exchange for 30% of the profits.

I think we'd be better off getting the LLC taken care of before purchasing our first property in order to protect our personal assets, but others have said it isn't a big deal if we have insurance and use contracts to properly protect ourselves with contractors, etc.

I'd really like to hear the opinions of experienced BP members and I would appreciate any advice!

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Will Barnard
  • Developer
  • Santa Clarita, CA
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Will Barnard
  • Developer
  • Santa Clarita, CA
ModeratorReplied

Mo,

From my experience and info given to me over the years from many asset protection advisors, attorneys, CPA's, etc, you should not be flipping properties in your personal name! You open yourself up to personal liability if anything should go wrong (during rehab, someone gets hurt above and beyond your insurance coverage, and most importantly, after you have sold it, the buyer could come back at you and sue for something). Better for you to get your entity sued which holds very little to no assets, than your personal self!

Also, for tax purposes, I have been instructed in my case to flip using a S-Corp, and hold my long term rentals in LLC's.

This is not legal or accounting advice, just third hand info from my experiences.

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