I'm new to BP and to REI in general, even though I've had my home rented out for the last 4 years while living abroad. I'm looking to purchase a property or two in the Baltimore area, and was wondering if anyone had experience with LLC's.
Specifically, I just want to know if it makes sense. I've read what I can find about them and their $300 yearly filing fee, as well as posts from other states, but if anyone has any personal advice about whether they make good sense in Maryland (or general advice, really), I'd appreciate it.
@Mike Fintel hello neighbor, welcome to BP. I'm interested in learning more about MD LLC's as well. I'll watch this post.
@Mike Fintel One thing to keep in mind is that you want an LLC to own a property, that means that you will need to get a commercial loan for it. You will not be able to acquire residential loans, which typically have lower interest rates and longer terms for properties owned by an LLC.
Yes lots of people use LLCs in MD to hold properties. Yet lots of people don't use them.
This is a complex question that weighs risks and costs. Without knowing more about your specific situation it is hard to say. Only an attorney can give you legal advice for your specific situation.
In general an LLC can help limit your liability. But this limit is not absolute and probably not as strong as you might think. Also an LLC will increase your costs. There are also tax consequences to owning properties in entities, and how you chose to have that entity taxed, in the case of an LLC.
For what it is worth most experienced landlords hold properties in LLCs.
If you want to learn more I recommend the excellent books and website of Nolo Press.
Imo - not a lawyer so take it for what it is and get legal advice if unsure.
The llc will help reduce risk however if you are negligent you can still be held liable.
Talk to other people, get llc for dummies.
Here in ny pretty easy to setup. Doing it my self costs apx $500... an attorney probably charge 1500-2000.
The goal is to be poor on paper but control alot!
I invest quite a bit and would never hold a property (other than my personal residence) in my personal name. The liability protection is worth the cost in my opinion.
Thanks to everyone who weighed in.
@Russell Brazil and @Brad Chandler right now I'm working on both a cash sale and a financed sale, and I'm wondering how you guys get around the "due on sale" clause in a mortgage, or do you buy everything in cash?
From what I've read, LLC seems to be the way to go, but I can't get my head around how to do it if I don't pay cash for all my properties.
@Ned Carey Thanks for the tip on NOLO. I actually had the mouse hovering over the "buy" button for their LLC book, but then decided to find out if I really wanted to do it. I also checked out your website and I appreciate you putting information up there for people; you'll see my name come through for you mailing list, too.
Why get the LLC in MD?
Regulations stipulate to get an LLC to hold the company, but the law doesnt require that the holdings company be registered with the state in which it originates.
I don't attempt to get around the due on sale clause. The properties that I have that have residential mortgages are owned by either me or my wife. The properties I have that are owned via llc's or some other forms are financed with commercial loans.
@Logan Hicks Right now my tax home is still MD, so I can't think of a reason not to get an MD LLC. The way I read things I'll have to pay the $300 yearly filing fee for doing business in MD regardless of where the LLC is based. That said, do you know of a benefit to registering in another state? I have connections to DE, too
@Russell Brazil Thanks. So if I understand correctly, you have some properties under your name and some under an LLC - since I'm new to all this, can you explain why and how you've done that (or just give me a few more details)? I'd appreciate it.
@Mike Fintel - due on sale clause in what way? If you transfer from your personal name into LLC? If yes, a lender will never exercise due on sale if the loan is current.
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