First, some background info; I am working on buying my first rental property. I am planning on financing it with a home equity loan on my residence which I own outright. This all hinges on the pending appraisal of my home. If things work out like I think they should, I will be purchasing the property for $25K or less, and putting $5-10K into it. The rent will be around $500-600.
I have a two part question:
1. Do I go through the hassle of setting up and maintaining an LLC for this when we are talking relatively small dollar amounts?
2. If so, how does the fact that I am paying for it with a home equity loan on my residence come into play? I mean, do I just take that money and transfer it into my LLC and the rental is now owned by my LLC? Is it as simple as it sounds?
I guess the main underlying issue is I don't completely understand LLC's as well as I should. I have been looking for more info on the subject...if anyone can point me to a good LLC specific source, I would appreciate it.
You can either transfer the money to your LLC and then purchase it thru the LLC or you could purchase it yourself and then deed it into the LLC. There seems to be two schools of thought on LLCs vs keeping the property in your name. Personally, I put my properties into the LLC. Others choose to forego an LLC and just carry a large umbrella liability insurance policy. My feeling is that I want to place as many layers between my personal assets and a potential lawsuit, so I opt for the LLC route. I also have a umbrella liability policy. In my opinion, the more difficult it is to get to my personal assets in a lawsuit, the less likely a lawyer is to pursue it.
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