Rental Property Investor · Boone, NC · Member since 2015 · 291 posts · 88 votes
Hello,
I am a beginner investor, recently closed on my first wholesale deal. Now that I am starting to generate income from real estate, I want to know what would be the best way to structure my business. I am located in Houston, Texas and my goal is primarily to acquire rentals while wholesaling some deals along the way.
I do not have any LLC or anything set up yet. What basic investment structure would you recommend from your personal experience? I was thinking about two LLC's, one for acquisition (the rentals would be under that LLC name, and I would also use that LLC to do my wholesale deals) and a second LLC that would act as the property management company for the rentals (hold the rent money, pay expenses..etc).
... and no, it's NOT a "paperwork nightmare". Been there, done that. The beneficiary / executor simply directs the trustee to sell the property. The attorney / title company does (most of) the rest (in IL, at least).
I doubt that Mark Kohler is anywhere close to "analysis paralysis". He'd likely not appreciate the comment, either. I'm just repeating what he promotes.
You can't run a business you've never built. Gotta build it first. You don't drive away before you buy the car.
If you buy in your own name first, then you have to deal with transferring property into your entity structure. That's doing things twice.
"When you do it right, you do it once." (Lesson from an early mentor of mine.)
... and no, it's NOT a "paperwork nightmare". Been there, done that. The beneficiary / executor simply directs the trustee to sell the property. The attorney / title company does (most of) the rest (in IL, at least).
I doubt that Mark Kohler is anywhere close to "analysis paralysis". He'd likely not appreciate the comment, either. I'm just repeating what he promotes.
You can't run a business you've never built. Gotta build it first. You don't drive away before you buy the car.
If you buy in your own name first, then you have to deal with transferring property into your entity structure. That's doing things twice.
"When you do it right, you do it once." (Lesson from an early mentor of mine.)
I didn't mean to attack you, I shouldn't have gotten in to that. He also said Wholesale by the way...
Don't want to restart this thread since I think all parties have --- more or less --- said what needs to be said. Only point I would add for future readers is that if you are interested in Mark Kohler and his advice, you can buy his books for cheap. The three I read over the years are:
1. Tax and Legal Play Book
2. What Your CPA Isn't Telling You
3. Lawyers are Liars
All good books. You can get all three for under $40 at Amazon. As of today, you can even preview a decent amount of it on Google Books to see if you are interested in reading more.
I am really curious about this topic because I am just starting out as well. Will, an LLC protect me if all I'm doing is wholesaling in the beginning? Dont know if I necessarily want to hold anything from the get go.
Also, umbrella policies are only good for properties I only only own correct?
Talk you're CPA first about your goals and finances. Then once you know how that is effected they will give you a tax strategy and options of incorporation to help. Then go to your attorney and have the incorporate the property structure in tandem with your CPA. The both must work as a team. Your attorney is NOT your CPA so will know nothing of your tax's and financial history and goals and can't advise on that. Your CPA will. Then the attorney will take that information into consideration with the legal side of matters. SCorp is great for overall structure of business. LLC's are great as holding companies. It all depends on your finances, tax's, short and long term goals.
Generally CPAs will want less structure less LLCs etc as it complicates bookkeeping.
Lawyers want to create all sorts of convoluted real estate holding structures for liability protection even if it makes doing business very difficult.
You have to choose something in between but I prefer less entities. Just one holding and one for operating. That's after you already have a million + in real estate