San Francisco, CA · Member since 2017 · 13 posts · 10 votes
The title says it all. Researching before trying my first house hack in NJ. Can you (or should you) start an LLC for your house-hack? Is it complicated by the fact that you're living in it?
Investor · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
6y
What most people try to get out of an LLC is liability protection. For the first few properties most investors buy (1-4 unit properties at least), it's not worthwhile. Decent landlord insurance, keeping the property in good repair, and possibly an umbrella policy is all you need.
Attorney · Slidell, LA · Member since 2016 · 322 posts · 179 votes
6y
Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.
A few problems you may run into: You will lose your homestead exemption (though I'm not sure that NJ has one). Your lending rate will be higher as it's a commercial loan. As a single-member LLC, you simply won't have the same liability protections.
Attorney · Tokyo, Japan · Member since 2016 · 184 posts · 145 votes
6y
Simple answer: you can. But I'm more interested in what you're trying to accomplish? What benefit do you think you're getting? And/or what risks are you avoiding in holding it in your own name? And what do you mean by house hack? That expression is used to mean a lot on this forum, most commonly a live-in flip.
Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes
6y
@Enrique P.
You could by why? Search through bp about everybody wanting to make LLC for a variety of reasons. But, the asset protection trying to be obtained by the LLC comes with a great deal of costs, from a variety of factors.
In your case, if you are going to hold short term or at least live there until you sell, you won’t have the benefit of the sec121 capital gains tax exclusion.
Financing it usually more expensive under LLC since you need a commercial loan, which means all the residential loan products are off the table for you.
The big kicker I always bring up is to achieve and maintain the corporate veil for asset protection, you need to run the LLC as a separate business, separate from your personal activities. That can be a pain especially needing a separate business bank account, etc.
If you are looking for tax benefits, there aren’t any. If anything, there is more accounting headache and costs.
Investor · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
6y
What most people try to get out of an LLC is liability protection. For the first few properties most investors buy (1-4 unit properties at least), it's not worthwhile. Decent landlord insurance, keeping the property in good repair, and possibly an umbrella policy is all you need.