Philadelphia, PA · Member since 2018 · 20 posts · 3 votes
Hey all!
I've found a property that I'd like to start my investment career with. It's a duplex and I'll most likely finance with an FHA or 203k depending on repairs needed. My question is... should/can I set up an LLC for my first investment or because I'm financing with an FHA, can I even setup an LLC for my first considering I'll be living in one of the units for a year?
Attorney · Austin, TX · Member since 2014 · 1k+ posts · 932 votes
7y
With the changes in law you should be able to transfer the property into the LLC after the purchase is complete, but I would encourage you to talk with an attorney and have them review your situation specifically. In the past this type of transfer could trigger the Due on Sale Clause; however, recent laws are making this type of transfer possible. Prior to these changes investors would purchase a property into their personal name and transfer them into Land Trusts, then assign them to the LLCs for the protection - still a viable option.
With it being your first property I would recommend finding an experienced investor and/or attorney to work with. If you don't form and operate the LLC correctly it will not actually provide you the protection you expect. Minimally I encourage people who DIY their entities to have an attorney review the paperwork and advice them on proper operation requirements.
As far as living in the unit - you would just need to be sure to operate the property in the capacity outlined in the agreement. The main issue I see investors run into is when they try move out early and try renting all their units out - it's a tempting proposition but will get them in trouble with their lenders.