Newbie - Is registration of Business required?
3 Replies
Karla Barbacena
posted about 2 years ago
I am a newbie in real estate. I am planning to buy my first investment property this year. Before buying, would you recommend to incorporate and register my business in the regulatories or can I just buy it and the asset will be recorded on my personal financial statement?
I am considering here taxes and legal responsibilities.
Nathan G.
(Moderator) -
Real Estate Broker from Cody, WY
replied about 2 years ago
Talk to your CPA but you're probably over-thinking this.
A lot of people create an LLC and place their properties under that. This may be a good solution for you but be sure to understand the law and operate it properly so you don't lose the protections afforded.
Most investors I deal with own the property in their own name. I have personally never met an owner that was sued and lost their investment(s) so I think the hype surrounding LLC and umbrella insurance policies is just that: hype.
Talk to your CPA, educate yourself, and determine what protection is best for you.
Robert Leonard
Rental Property Investor from Greater Boston Area
replied about 2 years ago
@Karla Barbacena Congrats on starting your journey into real estate investing!
That question is very loaded and complicated. Everyone's situation is different, and the truth is, it depends.
If you're looking at more than 4-unit properties, you will most likely have to have a legal entity to get financing (LLC, corporation, etc.). However, if you have 4 or less units, you may be able to keep it in your personal name. It varies from lender to lender. Some won't lend on a residential property (less than 4-units) with a conventional residential loan product, while others will.
If you do decide to keep the properties in your personal name, I would highly recommend getting sufficient (and likely even more-than-sufficient) liability insurance. I would get insurance to essentially replicate the liability protections of a legal entity, like an LLC. In regards to tax benefits, I would recommend talking to a quality CPA in your area.
Robert Leonard
Karla Barbacena
replied about 2 years ago
Many thanks. Really appreciate your prompt reply.