Best entity for long term rental holds

2 Replies

I am buying a rental in an out of state market in a couple weeks.  I was curious as to everyone's thoughts on entity.  I do not plan to take any money out of the rental initially (the first 3-5 years), and don't plan on ever selling the rental (of course, you never know - but that is the plan).

Do I start a company in the state where I am buying? Use my fix and flip company in my home state? Form a LLC, S Corp, or C Corp? The new company will hold several rentals - once I have 8-10 properties in the new company, I will form another company to do the same.

Thank you for the feedback!

If it were me I'd just own them in my own name and get good insurance, unless there were investors or partners involved. I believe that entities are unnecessary and overrated in the absence of partnership.

If you insist on owning them in an entity, the entity will either have to be formed in the state where the property is located or an entity from another state that has been registered as a foreign entity in the state where the property is located.

LLCs are often the vehicle of choice.  I've been advised not to hold appreciating real estate in a C corp but since I don't have any C corps so I haven't paid much attention as to why.  Has something to do with unfavorable tax treatment.

In the case of using any entity, you'll have to carry the additional freight of annual state fees, accounting and tax return costs, and higher borrowing and insurance costs. I don't think that you get much for the price, but that's up to you.

@Account Closed - I am a buy and hold investor with my husband. We have some property in our name and property in a LLC. But we did not get an LLC for protection reasons it was because we had to get commercial financing to go forward and they can only be made to a business (residential loans can only be made to a person). If it weren't for that I don't think we would have felt the need to do so.

If you are going to incorporate, here is a helpful "wizard" to help you choose what is right for you.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here