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Beginning a Real Estate Portfolio
Hello BiggerPockets Forums!
I am beginning to grow my real estate portfolio. Currently in the process of attaining my first rental property in the Denver market. I have some outstanding questions to see if some of these items are worth it in the beginning stages of real estate investing. My two questions are as follows:
1. Should I create an LLC for this first rental property, and future properties?
2. Should I hire out a CPA for these beginning stages, even if it is my first investment opportunity?
To give some insight and context, I am a new graduate engineer, a year and a half out of college. Moving to Denver before June 1st of this year. Already in contact with an agent and lender in the area. Looking to close on this first property anywhere from mid-March to June. I intend on house hacking this property and pushing for the 5+ bed SFH range. I want to live in Denver and call that place "home", and plan to grow a portfolio in this market (and outside as well). Is it worth it to set up an LLC and hire out a CPA for a financial perspective/tax benefits?
Looking for any thoughts or ideas. I want to take off in real estate investing and any additional knowledge early on will help for this long term vision.
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The above threads might be useful. This topic comes up a all the time.
Some people use a LLC, and many people don't use a LLC. landlord insurance and and umbrella policy (which you would need with your LLC anyway) are all you need -- and keeping you properties well maintained.
Again, the LLC is there for asset protection, not for tax reasons, unless you are investing with a non-spousal partner. Even then, there is a bunch of "stuff" that you have to do to operate the LLC correctly to maintain its corporate veil to achieve the asset protection. Then, there are the additional costs such as the commercial loans, etc.
That beings said, any property with more than 4 units is considered a commercial property. The residential consumer protections and lending do NOT apply. So, you are looking at 5+ "multi-family" or a home that has 5 or more bedrooms? With multiple units, your risk exposure increases so for commercial properties is where you would want a LLC.
As far as the accounting, you are going to need somebody to teach/show you how to file your SchE for federal purposes and however its handled for your State taxes. The main thing is to setup your depreciation correctly from the start. As already mentioned, house hacking will make your return very complicated.
Good luck.