I need some advice on how I should start up my REI business. I will be primarily be doing buy and hold with the occasional flip. I will be financing the purchase and rehab through a combination of home equity line of credit and stock sales. My plan is to take out a conventional load after all reparis are complete then transfer the property load to the to the LLC. I want to make sure I get the correct tax breaks and am not sure how it works with the personel and LLC finances being mix up. Or should I not even worry about the LLC until I have multiple properties.
My goal is to start building secondary income for when I retire.
I hope my question is clear,
Hey Damien, first timer myself. Have been doing some reading and took a class recently. From what I learned is LLC is the way to go. It keeps your personal stuff safe from lawsuits etc. Along with the tax breaks. Good luck. Interested in what others here say.
Damian, if you are the sole-member of the LLC, you are classified as a "pass-through entity" by the IRS, meaning you will be taxed as if you are an individual/sole proprietor unless you elect to be taxed otherwise (e.g., as an S/C-corporation).
If you are going to be financing the property and not paying cash, it could get a bit muddy if you transfer the property to your LLC. Since an LLC is an entity outside of yourself, I would imagine this would be considered a title/lien holder change, which could trigger the due-on-sale clause.
This article on BP outlines a lot of the pros/cons of using an LLC to hold and purchase rental properties: http://www.biggerpockets.com/renewsblog/2013/08/17/rental-properties-llc/
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