RE Partnership LLC or Not in VA?

Question

Hey BP!

Been doing some research on LLCs and looking to get some opinions from the community.

Situation:

Partnering with a Co-Worker on a Buy and Hold Purchase of a SFH. Partner is providing the Down Payment, While I am Signing for the remaining balance of the loan. We will be renting the property out to my parents as they are not able to qualify for a loan on their own for est 2 years. They are selling there home in AZ and relocating to VA. Them affording the payments is not a problem or a question. Monthly expenses to include Mortgage,Ins, etc is around $700p/m and we will be renting it to them for around $1k p/m.

Discussion:

Between myself and my partner, It seems like the most advantageous route for us two is to form an LLC with this property. Unless I am wrong it should work as a "Pass Through" tax wise for us so there isnt a concern there. However, I Currently own 1 rental property and my primary residence I would want protected. Also, my partner does not own any properties and rents his primary residence. We both have great W-2 Jobs in the 100k+ range. In Your Opinion, LLC or Not? Ready Go!!!

Steven Hamilton II · Answer

You can choose to use an LLC or not. If you don't you each report your half of income and expenses on your appropriate returns. (I find this gets messed up often). I recommend filing the partnership return(whether you use an LLC or not) and keep detailed track of your basis, and capital accounts).

It is most efficient. I'm not sure who you're going to be sitting with but take a look at some of the information below.

You definitely need someone qualified, does not have to be a CPA, could be an Enrolled Agent or an attorney. Just make sure they specialize in tax and have significant experience dealing with real estate investors.

Here is a great list of questions to ask a potential accountant: http://www.biggerpockets.com/forums/51/topics/7044...

Also check out the www.NAEA.org page in your search. It should help you find someone local. If someone comes to me, I'll send them your way.

If you need help in your search or want to verify something don't hesitate to ask.

For example: I have clients worldwide and things are just as easy as I e-mail them, talking on the phone. I even use Skype and TeamViewer to communicate with clients so I'd highly recommend looking for one of the best with great references that interviews well with you.

So look for someone you can connect with that works out for your situation.

Feel free to ask here if you have questions

Steven Hamilton II · Answer

You should still consider filing a partnership tax return to track basis and each of your investments. Its easier in the event someone passes or a something else happens.

Jereme Tayamen · Answer

@Steven Hamilton II thanks for the info, after speaking with my partner on the deal it looks like we will plan to not LLC this deal and cover our selves with rental property insurance and possibly an umbrella policy if we feel the amount is inadequate.

Jereme Tayamen · Answer

I also Note that I have been trying to schedule a sit down with a CPA for a while now but due to the current tax deadlines they are all weeks out availability so that is why i am asking on here but will be eventually sitting down with one. Thanks.