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Jordan P.
  • Rental Property Investor
  • Stevens Point, WI
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How do you have your BRRRR business set up?

Jordan P.
  • Rental Property Investor
  • Stevens Point, WI
Posted Dec 2 2020, 04:27

Hi BP members,

My husband and I are BRRRR investors in central Wisconsin (marital property state). We currently have one LLC, taxed as a disregarded entity, through which we purchase properties, rehab them, and then rent them out. Our current property (in the rehab phase) we will be renting out on a short term basis through Airbnb. Other properties will be used as long-term rentals. We will be moving into using private lending to fund the acquisition and rehab of properties.

In a recent meeting with our attorney, he recommended that for liability purposes we have two separate businesses: one for acquisitions and rehabs and one for holding the properties as rentals. His reasoning was that if something goes south in the acquisition or rehab phase, lenders (or other harmed parties) would not have access to our rental property portfolio. In this case, the "acquisitions & rehab" business would be an LLC taxed as an S Corp and the rental business an LLC taxed as a disregarded entity (though I understand that short and long term rentals are taxed differently, so I wonder if those would be separate as well?).

On the other hand, our CPA recommended that we keep everything in one LLC, taxed as a disregarded entity, in order to avoid the necessary "reasonable compensation" requirement that comes with S Corps.

I would truly appreciate anyone's advice that has formed an LLC to complete BRRRR deals. Especially advice on how to move forward by renting on both a short and long term basis.

I know that many of you out there don't use LLCs at all, and I'm happy to hear your advice as well, but to be clear we will be using an LLC to conduct our business.

Thanks so much!

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