I'm new to real estate and I hear a lot about starting your LLC. Should I start one for my first rental? And if so, where do I start?
Subbed. I am also curious as to what answers are provided.
@Thomas Lee Nuckles you'll get answers from both sides. I did, because it gave me more lending options, but that may not be the case for everyone. It depends on a lot of factors as to whether it is worth doing.
If you were to start an LLC, you start by contacting a lawyer to set up the paperwork so that it does as intended, protect your personal assets from liability
@Thomas Lee Nuckles . If you’re financing the property the answer is no for a couple of reasons.
1. The only equity you’ll have is the down payment. Your homeowners policy will protect you for much more than that.
2. You won’t be able to get financing in the LLCs name if it doesn’t show profit and have tax returns.
Also keep in mind that financing it in your name and quit claiming it to the LLC later is not a good idea.
Don't bother with LLC just start buying. And don't put you and your wife's name on ANY loan. Your name or her name only! Buy a nice property in a nice area that will rent for 1% next thing you know you'll be making out your 10 conventionals each.
****This is a question for an attorney, which I am not.
This was typed on an iPhone
My rule of thumb -
If net personal wealth + rental property equity < $1M, then just use $2M umbrella policy
If net personal wealth + rental property equity > $1M, then use LLC and umbrella policy
If it is a 5+ unit property, you should probably consider using an LLC. Otherwise, no.
The property mortgage, landlord insurance policy, renter’s insurance carried by all tenants, solid property management and an umbrella policy should be more than enough asset protection on a first rental.
Bank financing becomes more difficult with an LLC, not to mention the added expenses that eat up your cashflow.
If you decide not to LLC just make sure you have a good umbrella policy, as if something happens at your home or at your rental you are risking losing both.