Is a legal entity needed for your first property?

[Jacob Eddy]

Just got finished reading the chapter on setting up legal entities in the Tax Strategies for the Savvy Real Estate Investor.  Are legal entities or LLCs needed when you acquire your first rental property or is this more for someone with a larger portfolio?

On a side note, when I read the deductions chapter, it said you could even write off the Biggerpockets book since it is for growing your business!  Sure it was only a $15 book but for conversation purposes, can I write off this book even if i don't own a rental property yet?  :)

[Daniel Sprague]

My suggestion would be to purchase the property yourself to avoid financing issues, and quit claim deed the ownership to an LLC shortly after.

You will not get a secondary market loan (Freddie or Fannie) if you are trying to purchase as an LLC. You need to take advantage of the long term fixed rates you can get with a secondary market loan when you are beginning as they become harder to obtain as you grow.

I am not suggesting the LLC because there is an incredible need for it, especially if you aren't going to have much equity, but rather as part of the process.

I have always believed if you don't do things correctly when you are small, you will not do them correctly when you are big.

This conversation doesn't really even get to the heart of why you may want an LLC to protect what you may have accumulated in wealth so far in life non-real estate.

Thanks,