Create one LLC or multiple?

[Sean S.]

Hello,

I have heard from many investors to create an LLC for each property. If my investing technique is house flipping and plan on selling the property before buying the next, should I still create a second LLC for the new property or should I continue to operate through the first LLC? If I am flipping 2 homes at once would you recommend creating 2 LLCs?

[Will Barnard]

This is a common misconception and the bad information continues to be regurgitated throughout our industry. You do NOT need to form an entity for each property you own regardless if you flip or buy and hold. What IS important is the amount of equity exposed. For instance, if you buy a property for $100k and you put 10% down, you only have $10k of equity exposed which would be eaten up in resale costs. So the number of properties inside one entity is less of importance than the amount of equity exposure. That number is person specific as everybody has different risk assessments, different financial situations, etc.

If I was to purchase a 50 unit apartment building and two rental houses, I would use one entity for the apartment and one for both of the homes. Again, every situation is different and one should consult their tax professional, but generally speaking, for flipping, it is best to use an S Corp and for buy and hold, an LLC (again, this is generally speaking and not to be construed as tax or legal advice).