Just Starting with buy and Hold - LLC or S Corp Needed?

[Joe Luciano]

I'm trying to understand whether or not it is recommended to create a LLC or S Corp from the start. I plan to buy and hold multi-family homes and create a passive income. Do I wait until I have 5 - 6 properties and then form an LLC or S Corp? If I make an LLC or S Corp, how do I pay myself without having the income be viewed by the IRS as "Earned Income"?

[Andy Collins]

@KrisHaskins I think you need to go talk to a lawyer, transferring title when the mortgage is in your name will not protect you,,,thats about as easy to pierce as it gets.

You can get commercial loans in a corp., however unless that corp is earning money and credit worthy, you will end up signing a personal guarantee,,,so nothing gained there.

You could have the property held by a corporate or LLC 4 entities down from you, but if you have anything to do with the management or rehab of it,,your on the hook (and you will be paying higher interest and if interest rates go up you can't lock those commercial rates in for nearly as long.

If your personally worth a few hundred million, then you take a different approach, but I personally have a $5M liability policy, and put homes in my name,,,I'm close to hitting 10, so I will have to go to commercial loans going forward, but not until I get my 10.

I negotiate contracts for a living, and negotiate terms with attorneys on a daily basis, don't think what your doing is providing the protection you think it is. It is amazing how many people have all this LLC's, etc, and get nothing from it, for most individuals it is a total waste of time.