Buying second home in Colorado; LLC, Trust needed?

Question

Hi, I am buying my second home in northern Colorado (Fort Collins, Laporte, Wellington, or even Laramie Wyoming possibly). I am planning on living in the new home I buy and renting out my current home or else just renting out the second home. I keep hearing about LLCs and Trusts. Does anyone have an experience with this? Mainly, I would like to know, what kind of LLC is would need and what site should I use? I would like to set it up before I buy my second home so that I can put that home under the LLC. Secondly, should I also set up a trust to put my house/s under?

Thanks for your time and advice in advance!

Logan McConnell · Answer

Jean, that sounds like great advice.  I had heard about that somewhere but didn't really think about it.  I guess my question is: should I buy my second home under a llc if it will be a rental abd should I put my current home under a llc if I am going to turn it into a rental and live in the new home I purchase.  I don't plan on selling my current house, would like to rent it down the road so I don't see myself selling it in the near future.  This is all very confusing.  Thanks for he info!   My friend recommended I added an umbrella policy through my insurance company which was a great idea.  With the car discount, it only came out to 4 dollars a month and covers any claim where I am liable up to 1 million.  Seems worth it, just in case something ever happens.

Erik Tollefsrud · Answer

@Dan Mackin could shoot that recommendation my way as well? I was also thinking about setting up an LLC but wanted to talk to a professional that is familiar with investing. Thanks

Jean Bolger · Answer

If you are going to live in the home do not put it in an LLC or trust. If you do, you will lose the main advantage of owner-occupancy which is the ability to sell for a profit in the future without being taxed on the capital gains. You pay no tax on the sale of a house that has been your primary residence for two of the last five years.I don't know your entire financial picture so I can't give a fully informed opinion, but it is very hard to see how forming an LLC or trust at this time would help you- and it just might hurt you.

Logan McConnell · Answer

Thanks Dan,

I appreciate the response.  Yeah, if you have a lawyer recommendation, that would be great.

Dan Mackin · Answer

There are all kinds of things that come along with LLCs and trusts when it comes to real estate. Some swear by them while others don't think they are worth it. It's really best to spend a few hundred bucks and consult a real estate attorney in state and a CPA and see what they recommend. Keep in mind that there are financing problems associated with them as well. I can send you info on a good attorney if you need it.