To LLC or not to LLC, that is the question:

Buying & Selling Real Estate
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To LLC or not to LLC, that is the question:

Seth Maynard
Cheshire, CT · Member since 2017 · 13 posts · 6 votes
Good morning all - looking to get feedback on whether a new investor should establish an LLC early on and quick deed properties post closing or just keep things under their name(s)? It's the direction I'm looking to go, but have gotten conflicting feedback. To my mind it's a layer of separation between us and the tenants, and would allow for cleaner financials. Additionally, I believe banks requires 24 month history to write loans to a business, so why not get that started early? Thanks for any insights.
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Tom GimerBusiness Member
DMV · Member since 2017 · 3k+ posts · 3k+ votes
8y

If your plan is to operate your real estate business as an entity and eventually want to borrow in the name of the LLC (even though each member may be required to personally guarantee loans, at least initially) then it makes perfect sense to create the LLC now and adhere to all the formalities.

Most of the BP comments about "you don't need an LLC" are to new investors who think they need an LLC to get started in REI... which you most certainly do not.

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  • Robert Obniski
    Investor · Madison, WI · Member since 2015 · 128 posts · 33 votes
    8y

    I'm in the same boat as you. My real estate foundations have been set. Now I need to know the best directions for my rentals. Hopefully someone can answer you question which in turn will help me.

    Good Luck! 

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  • Guy Yoes
    Rental Property Investor · Springfield, MO · Member since 2017 · 266 posts · 312 votes
    8y

    There are a lot of different views on LLCs given on BP

    Here are some questions we asked ourselves when we started REI.

    Are we at the point where I need to spend the money for a LLC?

    Will we be partnering with someone besides my spouse?

    Will we manage the property or hire a PM company?

    Are I using funding the LLC or using my assets to purchase the property?

    Will we use this LLC for all my properties or set up a new LLC for each one?

    Is the funding from our assets or a SIDRA?

    Are we planning to FLIP or BRRR or ?

    Are we going to truly educate ourselves on this process or ask others what they think and then do what we want anyway?

    I believe many people think they need the LLC first and that it will accomplish all these great things. However, it will not serve your purpose unless you meet all the requirements of having one. If you don't plan to follow it as it was designed for, you have wasted time, money and resources.

    We joined a local REI club and went to meetings. We spent weeks just listening and then weeks asking questions. We interviewed 3 CPAs recommended by club members. We listened some more, asked more questions and when we felt comfortable with the decision, we made the move to set up the LLC.

    Best of Luck! 

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  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y

    If your plan is to operate your real estate business as an entity and eventually want to borrow in the name of the LLC (even though each member may be required to personally guarantee loans, at least initially) then it makes perfect sense to create the LLC now and adhere to all the formalities.

    Most of the BP comments about "you don't need an LLC" are to new investors who think they need an LLC to get started in REI... which you most certainly do not.

    Gimer Law518 Reviews
    WebsiteView Page
    1Reply
  • Seth Maynard
    OP
    Cheshire, CT · Member since 2017 · 13 posts · 6 votes
    8y
    If your plan is to operate your real estate business as an entity and eventually want to borrow in the name of the LLC (even though each member may be required to personally guarantee loans, at least initially) then it makes perfect sense to create the LLC now and adhere to all the formalities. That's exactly my long term intent.
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