I'm still in the learning stages of SFH investing, particularly out of state (I'm in the SF Bay Area), but I wanted to make sure I understand the basics of opening an LLCs for REI purposes. I know the basic reason to place property inside of one is asset protection. And I'm a tax professional, so I understand the taxation issues. But I'm looking for opinions on if it's a actually a good idea for someone living in CA.
if I create an LLC in another state, I would still have to pay CA $800 for every LLC I own. Out of state LLCs are treated as foreign LLCs in CA. So already, that's a huge expense if I'm cash-flowing say $1,200 a year.
Also, please correct me if I'm wrong, but there are potential problems with owning property in an LLC:
- It's harder to get a SFH loan for anything being bought by an LLC.
- Additionally, it would be harder to refinance/pull cash out if it's in an LLC.
- There's a chance, albeit apparently small, that a lending company would call the loan due if you change title/ownership from your name to an LLC.
Am I missing anything here? For CA residents, maybe a basic umbrella policy would suffice?
@ neil you have covered pretty much everything. The reason though why many place a property in a LLC is to create separation from the property in the case of litigation. I do believe the umbrella policy is a must. another option may be a trust to create separation. I have heard of people using that to create some separation along with a umbrella policy. I know it is a lot easier to move a property in and out of trust.
do not construe this for legal or tax advise just another option i have heard others use.
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