Financial benefits to forming an LLC for real estate??

Question

I'm looking for arguments to help convince an investor to form an LLC before buying an apartment building for rental income. (He won't occupy the property.) He's more concerned with immediate tax/financial benefits than liability protection. Any help appreciated. Thanks!

Natalie Kolodij · Answer

The 199a deduction is 100% unrelated to having an LLC or not. It doesn't impact your qualification for that deduction or not.

Tell him to get a new tax pro- one who specializes in real estate and who actually knows tax laws.

Jason D. · Answer

@Sara J. There are no tax benefits to holding a property in an LLC.

Sara J. · Answer

Thanks to everyone who replied. His accountant had advised him to create an LLC & mentioned a tax benefit from the 2018 tax law (Section 199A). Seems like the consenus here may indicate this is the only real advantage financially-speaking. I'll pass that on. Thanks.

Tom S. · Answer

@Sara J. Depending on the size of the apartment complex, an LLC could have negative financial benefits. For example if it's a 4 unit, you can get a conventional loan for 5% and 30 years. If you formed an LLC you would instead have to get a commercial loan on that same place, which would have higher rates and a shorter term.

Bjorn Ahlblad · Answer

An LLC is a disregarded entity for tax purposes so it does not offer the kind of help he would be looking for. There may be other structures, C corp etc that are better suited depending upon how much money is involved. Talk to an accountant.

Eric Mayer · Answer

You may be doing the investor a disservice if they are just starting out. They would be better off getting better financing in their personal name and acquiring an umbrella insurance policy to protect themself.

Financial benefits to forming an LLC for real estate??

Financial benefits to forming an LLC for real estate??

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