LLC for personal residence?

Question

Hello Forum
I've read and reread about setting up an LLC before buying a property and it's advantages. Just spoke with my CPA and as per her, getting a mortgage on LLCs name has gotten very hard. Is it true? What's the general experience and advise here?

I'm in NYC and would like to purchase a 2 family - use one unit as primary residence and other rental.

If not LLC, is it still possible to take depreciation write off on personal returns ?

Any insights would be helpful. thanks much.

Bill Gulley · Answer

There are several issues you and your attorney need to review. Asset protection at your stage of investing might be better served with any homestead exemption allowed in your state as a personal residence.

Another issue is that your duplex will be treated as an investment to extent of the business purpose, you will not be able to depreciate that part of the asset used for your personal use and common elements will need to be proportionate to use..

Dave Toelkes · Answer

Jack,

When you have a rental property, you get the same rental expense deductions whether you have an LLC or not.  If you hold the property in your own name, you report your rental income and expenses on Schedule E (1040)

Ebere Okoye · Answer

It will be next to impossible for you to get a loan in an LLC name. What I did with my NY property was to purchase in my name and ten transfer to an LLC. Fortunately, there were no transfer taxes in NY so I only paid the attorney fees and the recordation fees to get the transfer done.

Ann Bellamy · Answer

I think an LLC is overkill on a personal residence, even a duplex.  Find a good real estate attorney and CPA IN YOUR AREA - you need people who know the laws for your location.  For example, in NH we don't use trusts much because of the NH laws, but in MA they are everywhere.

Consider an umbrella policy to increase your liability protection since you have a tenant, that will help also.

Transfer taxes in and out of an LLC can be killer, depending on the location also.

Rob Gillespie · Answer

I agree with Ralph, I would not go to an LLC, I would use a trust for a primary residence. Whatever you use, you will need to sign personally on a mortgage note. If you transfer to an LLC after you close, they could call the note due, but probably wont. With a trust, it is legit with the lenders.

Jack Zuchars · Answer

Thanks People. That definitely helps.

Back to finding a reliable and knowledgeable attorney and CPA   :roll:

Ralph S. · Answer

I'm wondering what you're trying to accomplish with the LLC for a personal residence.  Also, since you're living in half of the rental, the LLC thing might get confusing on a tax return.  Portions for personal use, etc.
I'd check with a lawyer and a CPA.  A trust might be a better choice, given it's your personal residence, and still provide the liability protection.
As far as the loan in the name of the LLC, that same liability protection you get by holding the property in the LLC, protects you from the lender as well.  That's why it is so difficult.  You'll have to personally guarentee the loan.
Not a lawyer, or CPA.  Just MO.

John McNamara · Answer

Jack:  Each state has it's own laws, and I'm not an attorney (and I don't play one on TV  :lol: ) but here in Michigan, I would get a conventional mortgage in my name, let quit claim deed it to my LLC for $1.00.  Not sure what the rules are in your state.  Good luck.

Jack Zuchars · Answer

Thanks Guys. I read somewhere that a transfer to LLC is regarded as a sale so taxes are due at the time of transfer. Is it true? I'd rather start out as LLC ownership in that case but getting mortgage might sticky?

I'm sure this problem has been solved by people here.

thanks again.

Jeffrey K. · Answer

You would get the loan in your name and then transfer the property into the LLC.  Since you live there I don't think you need an LLC.  I would talk to a lawyer and your insurance provider.

LLC for personal residence?

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