How could I use my LLC

Question

Hello Everyone,

I'm preparing to purchase my first investment property in the new year, which I plan to house hack. I already have an LLC that I originally set up as a business entity to facilitate managing, overseeing, and expanding my real estate ventures. My goal is to grow in the real estate space, and I plan to self-manage this property.

I’d love your insights on how best to utilize my LLC in this process. Should I use it for asset management, rent collection, property management, or other roles? Are there specific advantages or potential pitfalls I should consider when structuring these activities through my LLC?

I also understand accounting and legality may play a role. I'm more so wondering what makes the most sense as I do want to treat my investing journey as a business.

Thank you in advance for your advice!

Tar-U-Way Bright · Answer

Thanks Bill for replying. You really gave me some great advise. Now I need to find a Real Estate Accountant.

Tar-U-Way Bright · Answer

Thank you Wale for the insight. I appreciate it!

Tim Delaney · Answer

If you are buying a primary then you will not necessarily be able to utilize the LLC for this property. I’m sure someone will tell you that you can transfer title of the house after closing, but what purpose would that serve? The loan is still in your name so any liability protection would be pierced. I suppose your LLC could be the property management company - but I think you are just over complicating things. Use the LLC to buy your first non- owner occupied investment property.

Crystal Smith · Answer

If you intend to pay cash for the property, then purchasing it in your LLC is a good idea.  A better idea is to purchase it inside of a LandTrust, making your LLC a beneficiary of the trust.  If you don't plan on paying cash and have to leverage with an owner-occupied loan product then you should set up your LLC as a property management company because you will not be able to borrow in the name of the LLC.  Have all payments from  the tenants go to your LLC.

Once you have grown to the point where you are beyond house hacking and are purchasing for pure investment, not a place to live, then you can really start using the LLC or other strategies.

Trevor Finn · Answer

Nice, my pleasure Tar-U-Way!

Ashish Acharya · Answer

@Tar-U-Way Bright Using your LLC for real estate ventures offers legal protection and tax benefits. Hold the property in the LLC's name for liability shielding, and use it for rent collection, expense management, and centralized operations. Rental income flows through to your personal tax return unless the LLC is taxed as a corporation. Deduct property-related expenses like mortgage interest, depreciation, and maintenance for tax savings. Ensure separate bank accounts for the LLC, and maintain proper formalities to avoid liability issues. If house hacking, allocate expenses between personal and rental use to claim deductions only for the rental portion. For added security, consider umbrella insurance alongside the LLC. LLC will not have tax savings for now. This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

Tar-U-Way Bright · Answer

This does help, Thank you for replying!

Tar-U-Way Bright · Answer

Thank you for your insight. Right now I'm saving up. I'm waiting to see how much I can afford to pin point a area but I would love to get something in the Marietta/Kennesaw Area.

Josh Bowser · Answer

What's up man!Specifically on the house hack - I'm not sure if the juice will be worth the squeeze from a tax and accounting perspective to run anything through an LLC. Also, I don't know if it would be worth it from a liability perspective either, but would advise to chat with an insurance pro/legal pro.When purchasing a primary residence, conventional loan guidelines will require you to take down the property in your personal name.When it comes to taxes, you'll likely be able to take the standard deduction AND itemize Interest, Taxes, Insurance, Depreciation, and expenses prorated based off the rented portion of the property when reporting the 1040 along with W2 income. Personally, this strategy put $4kish directly in my pocket / year when we we're house hacking. As long as you keep track of everything and report correctly you should be good to go.I'm always in the camp to Keep It Simple Stupid when it comes to running stuff through LLCs until you hit a certain critical mass of assets and/or income.Hope this helps!

Wale Lawal · Answer

@Tar-U-Way Bright

Using an LLC for real estate can provide liability protection, simplify accounting, and allow you to deduct management expenses, offering tax benefits and scalability. However, keep in mind it may complicate financing, add costs, and require careful management to maintain liability protection. From experience, proper planning, strong insurance coverage, and networking with experienced investors are key to making the most of an LLC for your investments.

Good luck!

How could I use my LLC

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