LLC for real estate and stock investing

Milwaukee, WI · Member since 2016 · 28 posts · 4 votes

I am starting to expand my portfolio in real estate, I currently have a primary residence, a duplex, and closing on a SFH rental soon. I also want to invest in equity and futures market as well. Does anyone have any experience where they bought properties individually and moved to an LLC? Or they have an LLC with real estate under it AND invest under the LLC name? I would like to hear about the pros and cons of this strategy and if it is the right time to do so.

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Bill HamptonBusiness Member

Accredited Investment Fiduciary, AIF®, Financial Planner, Tax Strategist, Real Estate Investor · Atlanta, GA · Member since 2012 · 2k+ posts · 978 votes

@Jeremy Lee, you cannot invest in real estate and stocks in the same LLC. That is considered comingling personal and business funds.

Buy the SFH in your name and transfer it to an LLC after purchase. If the bank calls the loan, which is unlikely, transfer it back to your name.

Buy your stocks through a brokerage firm. Do not use an LLC.

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Eamonn McElroy
Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
7y
@Jeremy Lee What are you hoping to achieve by doing this?
Tax-wise, it doesn't matter, especially if the assets are held in a "disregarded entity".
An attorney will give you plenty of reasons to segregate and hold the equities and futures in your own name or a revocable trust.
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Bill HamptonBusiness Member
Accredited Investment Fiduciary, AIF®, Financial Planner, Tax Strategist, Real Estate Investor · Atlanta, GA · Member since 2012 · 2k+ posts · 978 votes
7y
@Jeremy Lee, you cannot invest in real estate and stocks in the same LLC. That is considered comingling personal and business funds.
Buy the SFH in your name and transfer it to an LLC after purchase. If the bank calls the loan, which is unlikely, transfer it back to your name.
Buy your stocks through a brokerage firm. Do not use an LLC.
404-482-3170
Hampton Tax and Financial Services LLC4.7106 Reviews
Website View Page
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Frank Patalano
Rental Property Investor · East Providence, RI · Member since 2018 · 1k+ posts · 1k+ votes
7y
@Bill Hampton I'm confused.
Say I have a partnership LLC with 5 properties in it. Are you saying that I can't open a stock account with the same LLC? I'm not planning on co-mingling funds. The LLC also has a few loans to others as well and its also bought into a business.
I agree that the personal residence should not be in the LLC.
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Frank Patalano
Rental Property Investor · East Providence, RI · Member since 2018 · 1k+ posts · 1k+ votes
7y
@Jeremy Lee I always buy rentals directly in LLCs. I get commercial loans from local banks. Pro- your name is never on title. Con- Rates are better if you buy it personally.
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Jeremy Lee
OP
Milwaukee, WI · Member since 2016 · 28 posts · 4 votes
7y
@Bill Hampton why wouldn’t an LLC be able to open a trading account and invest through it? I want the LLC for the rentals for the protection and liability standpoint. I want to invest in futures and equities for deduction standpoint. To my knowledge, as an individual you can only deduct 3k in losses per year. As an LLC you would just deduct it as an expense, which could exceed the 3k.
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Jeremy Lee
OP
Milwaukee, WI · Member since 2016 · 28 posts · 4 votes
7y
@Frank Patalano I would agree. I would keep personal residence under my name. Would it be case by case basis on if the mortgage and rental can be transferred into LLC name? Or do all mortgages have the due on sale clause?
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Frank Patalano
Rental Property Investor · East Providence, RI · Member since 2018 · 1k+ posts · 1k+ votes
7y
I'm under the impression that almost all mortgages have it. Some mortgage companies might not have a problem with you changing it but they don't have to. You might be able to move it to a trust easier but that is not as good as an LLC.
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Eamonn McElroy
Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
7y
@Bill Hampton An LLC can open a brokerage account and invest in equities, bonds, and derivatives. Some hedge funds pursue an LLC legal structure instead of an LP. The LLC can also invest in real estate along with its brokerage account, it's not considered commingling of assets. Whether it is a good idea is another matter...
@Jeremy Lee "To my knowledge, as an individual you can only deduct 3k in losses per year. As an LLC you would just deduct it as an expense, which could exceed the 3k."
This is a misunderstanding. For an LLC taxed as a disregarded entity, there is no difference. Capital gains and losses are subject to the same limitations you currently encounter and are reported the same way on your 1040. For LLCs taxed as partnerships and S Corps, the capital gains and losses maintain their character as capital gains and losses and flow through to the owners on their K-1s. Again, exposure to the capital loss limitation here too.
For a C Corp, capital losses are allowed only to the extent of capital gain. Net capital losses in a tax year are generally carried back up to three years or forward up to five years. But now you're dealing with personal holding company tax if you hold equities in a C Corp...
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Jeremy Lee
OP
Milwaukee, WI · Member since 2016 · 28 posts · 4 votes
7y
@Eamonn McElroy what are advantages of investing through an llc then if any?
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Eamonn McElroy
Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
7y
@Jeremy Lee
Tax-wise, none.
There are legal advantages, especially in multi-member LLCs with capital members and managing-members.
Unless you're looking for someone to manage your capital for you and buy equities, bonds, and/or derivatives, it generally makes the most sense holistically to hold the assets either directly or through a trust, depending on your facts and circumstances, and goals.
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Chris Perez
Member since 2021 · 1 post · 0 votes
5y
@Jeremy Lee how did u end up structuring your LLC?
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David MAhon
Contractor · Mountlake Terrace, WA · Member since 2020 · 1 post · 0 votes
5y
@Eamonn McElroy - I am in similar situation as @Jeremy Lee. My goal is to simply to pull in higher returns for the idle cash sitting in my 2 member LLC Bank Account. The other member is passive and has granted me implicit approval to invest as I see appropriate. I would think pulling this capital into my own personal brokerage, tracking the basis, and then returning the profits would be a bigger headache then just opening a new account in the LLC's name?

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