House Hacking... LLC/Co.?

Question

Hi all,

I have not yet gotten my first property. My plan is to do some type of house hack. I’ve listened to a LOT of the podcast and obviously done other research, but it seems like they never really say anything about having any type of LLC/company after their initial rentals. For example I know if I would like to do some type of house hack I would want to get like an FHA loan and stay for a year at least. So of course that would be in my name. So I’m wondering if I just do a few more of those (refinance and get another FHA loan). Then maybe I would want to do a 1031 for something bigger... Should that be under like a company or something? I guess also I’ll cross that bridge when I get there and probably get/have a CPA and/or lawyer, but any insight is appreciated.

Thanks,

Kristen

Kristen Graham · Answer

Thanks Richard!

Richard Sherman · Answer

Hi @Kristen Graham ...I think I answer this question several times a day..ahaha..its all good!  House hack means you intend to live in it as your primary residence, this means that a 1031 is not an option (well, it could be for the portion of the property value that is a rental, but my guess that is more complex than it needs to be...) Luckily, even better than a 1031 and DEFERRED taxes is primary home exemption ($250k for single, $500k married filing jointly) .  This means you can make a capital gain of that much and pay ZERO taxes (state or federal.)

I would NOT do a LLC, it is too much complexity and cost and can cause issues with the mortgage (and would exclude you from the capital gains exclusion....at least I THINK so (check that with a CPA, I am NOT one.)  Just get a good insurance policy and a GOOD umbrella policy, a million or more should not be a huge cost and is a good idea anyways.