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Logan Cooper
  • Norfolk, VA
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When to start a LLC

Logan Cooper
  • Norfolk, VA
Posted Jan 27 2022, 21:05

I have been writing down a short list, in order of events, of my goals and objectives during my real estate adventure. When should I look to start a LLC to protect myself and my assets? Should it be based on a cash flow, or by number of assets?

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Joshua Janus
  • Realtor
  • Columbus OH & Cleveland, OH
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Joshua Janus
  • Realtor
  • Columbus OH & Cleveland, OH
Replied Jan 28 2022, 03:37

If you want to create a barrier between you and your assets, using an LLC is a great idea! The earlier you begin the faster you are protected and transferring assets from personal to an LLC in the future can call an acceleration clause on a loan and that is something you desperately want to avoid.

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Logan Cooper
  • Norfolk, VA
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Logan Cooper
  • Norfolk, VA
Replied Jan 28 2022, 11:56

@Joshua Janus could you expand on acceleration loans? Also, would it be worth it to get a LLC even with one 1 or 2 properties? And even a property manager when those couple assets could be managed in house? Or would hiring a property manager possibly increase cash flow based on their ability to put tenets in assets and assess the path to increase cashflow? I appreciate all your advice.

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David M.
  • Morris County, NJ
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David M.
  • Morris County, NJ
Replied Jan 28 2022, 12:42

@Logan Cooper

Poke around BP.  This topic comes up multiple times a day..

To try to answer your question, is somewhere between immediately, after you get going, or never...

start with this thread for an overview:  https://www.biggerpockets.com/...

And I usually like to throw this in since everybody thinks its okay to mix and match the Title and mortgage: https://www.biggerpockets.com/...

You'll see that many investors, at least on BP, will hold tens to some 50+ residential units in their personal name.  If you use homeowner's/landlord insurance, an umbrella insurance policy (for extra coverage), and keep the properties in good repair you should be covered.  Basically, the insurance will cover your liability and if you keep the property up there shouldn't be a reason for somebody to sue you for "negligence" or something similar.

If you use a legal entity such as a LLC, just remember that it won't be eligible for conforming residential loans. You will need to use commercial financing. You will also need to operate the LLC correctly which isn't impossible, but necessary to maintain your corporate veil otherwise what was the point...

Thats the really short of it.  I'd be happy to chat if you like.  Good luck.

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Logan Cooper
  • Norfolk, VA
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Logan Cooper
  • Norfolk, VA
Replied Jan 28 2022, 12:44

@David M. Thank you for all the information 🙏