Specialist · Gulf Breeze, FL · Member since 2014 · 6 posts · 1 vote
I'm wondering if the group can point me in the right direction. I recently purchased my first rental with a traditional loan in my name. I recently got it rented and wanted to put it in the name of my LLC, so I filed and submitted a quit claim deed, and was wondering what else is needed to have it under the LLC? Thanks in advance for any pointers.
Investor · Downers Grove, IL · Member since 2015 · 353 posts · 213 votes
11y
@Jeremiah B. are you really telling someone not to file a LLC because most don't file them correctly? Seems to me, the advice should be "Yes this a business and should be treated as such. With that being said, this means you must TREAT it as such. File the paperwork correctly, do not co-mingle funds, keep the paperwork for meetings, minutes, annual filings, etc up to date. Get the proper EIN for the entity, etc.
To say an insurance policy will protect you is absurd. @Steve B. nails it . do you believe that an insurance company will actually not find a loop hole to leave you high and dry? They aren't in the business of paying claims, but charging premiums!
But yes, sure you can get insurance and it might pay out on small claims. With that said, real estate investors that rely solely on insurance as a means of protection from personal liability take a significant risk. Liability policies typically have limits, exceptions and carve-outs. While the chance of a loss that exceeds policy limits may be remote, if it happens, the consequences can be devastating.
@Eric Schneider as you stated, this is a business. Get a proper attorney's advice to protect yourself correctly! If the attorney believes you shoudl keep it in your own name and use an insurance policy, I would be shocked, but they are the ones that know the laws.
I agree there are times when an LLC is a good option. Having a business partner is one of them. I am specifically talking about a SMLLC here. What I dont agree with is the standard reason people on here give for why they want to set up an LLC. They say its because somebody said its what you should do and if you dont you arent really in business, you have a hobby. They went to a seminar or read some investing book on how to wholesale with no money down. They flip one house and make $10K and they have already spent half of that on their LLC, their lawyer, their accountant, and three checking accounts for fear they will be targeted by the IRS for comingling their funds. They don't even know what that means.
I would guess that nine out of ten people here on BP have betweem zero and three properties and have 70+% debt on all of them. They probably have a 401K, a primary home with 75% debt, a few thousand in savings and a dog. Where is their exposure that warrants setting up an LLC and spending thousands between set up fees and ongoing fees for keeping it up? These investors have a few hundred a month in positive cash flow. Maybe $1000/mo? A little more? These are the investors that read about the rare lawsuits that exceed a million dollar judgement and think they will lose everything. They could buy a liability policy and cover all of their equity and their personal assets for a fraction of the cost of a SMLLC. These are the people that are being taken advantage of.
Investor · Rosebud, AR · Member since 2014 · 133 posts · 49 votes
11y
As the personal insurance company told me , when i showed them the lawsuit. Oh it doesn't cover business practices. and that THOUSANDS of dollars you are preaching about here is . $50 dollar forming fee , $150 dollar franchise taxes. And I pay the CPA about $1200 - $1500 a year to do taxes on 40 plus houses. That would have saved me Thousands...... 25 in legals and about another 20 plus in personal losses. There are personal injury lawyers advertising everyday on TV
When we tried to move a LLC property over to personals. I decided to move into one and keep it for myself. That was a major undertaking. Banks don't like to do that at all.
Partner decide to do same for his home and 20 acres. We got it changed before closing. I just had to sign off. a lot easier.
Here it doesn't cost thousands to protect you personally. it cost thousands when you don't. I paid a huge price personally because I didn't. But I don't live in Massachusetts either.
Rental Property Investor · Plant City, FL · Member since 2015 · 1k+ posts · 379 votes
11y
I am one that has been reading over and over about LLC or more insurance, but I don't understand why Trusts are an option? From my current knowledge they seem better and most likely cheaper. Why not put each property in a Trust?
Most on here are investors and haven't had the wonderful experience of having litigation. I have. I have witnessed in others (when I was in court for mine).
Ditto... it's really sad how many threads there are about this topic, each with different folks dispensing different advice. It's interesting to me how many people on here are eager to give their opinion (i.e., conjecture) as if it were fact. Yet none of them cite statutes or case law as the basis of their claim.
Talk to someone who's been involved in litigation, and you'll quickly learn the difference between theory (aka conjecture or opinion) and reality. Also, keep in mind, the majority of the "legal" advice you'll get on here (from those who have never litigated the subject at hand) is incorrect, damaging, and unsubstantiated.