Investor · brentwood, CA · Member since 2016 · 1k+ posts · 730 votes
5y
Never used one in 20 years, and I've avoided all the expense of setting them up, costs of maintaining them and the cumbersome and convoluted administrative aspects of operating with them.
But I must admit I have missed all the benefits of being able to hobnob with those pretending to be players by showing off my all my LLCs. It's been really rough in that regard, but I'm working through it.
Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes
5y
Arby & Jarret:
Different insurance companies may refer to the product by different names, but if you ask for a landlord policy your insurance broker/agent will know what you mean. Typically, the policy premium will be based in part on the number of rental properties you are insuring. Identifying the insured properties that are/will be covered under your umbrella is usually called "scheduling" the policy.
I think LLC is worthed if you want to buy apartments, but then I need to borrow money from HML which is costly (I may not be true here) . Then I go back with just SFR/MF with individual name so we can maximize 10 financed homes.
You had me until HML. I buy quite a few apartment buildings and haven't even considered HML as a viable funding source. Short deadlines for apts? Not a fit.
This isn't a thread about financing commercial assets, but when I started, the sellers financed for me. Tired landlords like monthly income with no headaches. Do some diggingđź‘Ť
Never used one in 20 years, and I've avoided all the expense of setting them up, costs of maintaining them and the cumbersome and convoluted administrative aspects of operating with them.
But I must admit I have missed all the benefits of being able to hobnob with those pretending to be players by showing off my all my LLCs. It's been really rough in that regard, but I'm working through it
hey, what do you do if some frivolous creditor or predator comes and gets a judgement or claim against you which attaches to your properties? How do you handle that?
Just more bogeyman talk,
so what happens if the earth spins out of its orbit and crashes into the moon? You gonna get your LLC to save you then, you might actually believe that listening to the carnival barkers that sell Rube Goldberg LLC structures ?
But to directly answer your very simple question; if it's a frivolous claim (which are like unicorns in the real world, they generally only exist in the minds of those that sell LLCs) it's just that frivolous, and won't stand on its own merits, your basic liability insurance will very easily address it. That is in part a primary purpose of why insurance is there, no LLC required, most especially for the very basic operation of well chosen passive real estate that is prudently managed.
If in the event you do have a very high external risk profile that might attract a real lawsuit (a drug addled teenager driver) then acquire the level of umbrella insurance commensurate with your real risk (not phantom risk from some imagery "predator" instilled in your mind from a group scare monger selling you an LLC template).
I would go even one step further and say an LLC in practical effect may actually INCREASE your risk profile as it could easily lull you into a state of complacency running your operation both in a careless and reckless manner. Because of this false sense of security you have been duped into believing you are actually setting your self up for trouble, not avoiding it.
Ca recognizes this risk and slaps you with an $800 annual filing charge for each and every LLC you report under for BOTH in state formed LLCs AND out of state formed LLCs if you are a Ca reporting resident. You might expect more legislation of this nature in the future among other aggressive states.
Rental Property Investor · Member since 2019 · 304 posts · 462 votes
5y
As mentioned previously, trying to purchase under an LLC can be difficult when trying to obtain mortgage financing. A better strategy is to buy it personally, then transfer title to a land trust with an LLC as the beneficiary. Transferring to a land trust does not trigger the "due on sale clause" but be careful that your loan documents do not include a title transfer fee which could be up to 1% of the value of the mortgage.
An advantage of LLCs that I don't believe was mentioned here is privacy. In most counties, it is easy to look up the property owners and their address if they 1. Are their own registered agent or 2. Own their primary residence. Not all states are like this, but many allow the owner of an LLC to be anonymous.
If you don't want your tenants to know who you are and where you live, an LLC can offer that additional benefit. Admittedly, most tenants won't know how to find this information anyway.
I also want to reiterate that wether under an LLC or in your name, taxes will be the exact same. As a matter of fact, a Single Member LLC is what is known as a "disregarded entity". It will appear on sch. E of your personal tax return, as if it doesn't exist separately from you in any way.
@Misael Carlos Vera it's more of an asset protection play. Tax benefits should be the same regardless. You need to determine for yourself if it's worth the risk. Good luck!
I agree with Dillon. If you are single owner it is more of an asset protection and should have no impact on taxes (besides the extra paperwork).
@Misael Carlos Vera it's more of an asset protection play. Tax benefits should be the same regardless. You need to determine for yourself if it's worth the risk. Good luck!
I agree with Dillon. Its more of an asset protection than having any impact on taxes if you are a sole owner.
@Christopher Smith I was wondering the same and been thinking that one benefit of LLC is that one can shield other assets such as 401k if something goes wrong. One example is if one defaults and then they can't go after any other assets
Real Estate Agent · Winston Salem, NC · Member since 2014 · 486 posts · 303 votes
5y
@Misael Carlos Vera I’ve always used my name when buying real estate. I did attempt to transfer my properties into a llc but stopped the process when I learned the loan could be fully due if the bank learned about the transfer. Something to think about if you attempt to do the same in the future.
Specialist · Huntsville, AL · Member since 2020 · 200 posts · 105 votes
5y
@Carlos Ptriawan I know lenders that will lend to LLC and will save you a lot of money versus the HML. You can also do a portfolio loan on multiple properties, and open opportunities for buying over the 10 properties you mentioned. Message me anytime if you would like to learn more.
Real Estate Agent · Phoenix, AZ · Member since 2019 · 158 posts · 140 votes
5y
@Misael Carlos Vera
I use an LLC because I am self employed and it's easier to get a commercial loan for
Fix and flip
Or fix and hold
Properties. I like having an LLC personally but no it's
Not needed to purchase properties and no it’s not only
Uses for protection. It’s tough to find a conventional loan to lend on something that isn’t livable at the moment. That’s what all my
Investments are value adds. So if your buying basically carpet and paint upgrades then yes you can def but in your own name and skip the entire LLC process. It's just another
Avenue of investing like many different ways to go from NY to CA.
Specialist · Cape Girardeau, MO · Member since 2020 · 43 posts · 9 votes
5y
@Misael Carlos Vera I've personally preferred going the commercial loans route. They make it much more convenient to aquire money for the property AND the rehab AND if you find the right bank they don't make you season the loans to refinance them.
Investor · NY · Member since 2018 · 1 post · 0 votes
5y
@Darius Ogloza Hi I have heard a lot of people recommend doing both setting up the LLC and doing an umbrella policy. Would you happen to know of a good solid insurance company?
Rental Property Investor · Maitland, FL · Member since 2017 · 11 posts · 2 votes
5y
@Nathan H. So if the property is in your name, you are still able to record expenses to reduce your taxable income? That’s what I understand as being a benefit on having an llc but we can still do this w/o an llc?
@Nathan H. So if the property is in your name, you are still able to record expenses to reduce your taxable income? That’s what I understand as being a benefit on having an llc but we can still do this w/o an llc?
That's correct. When it comes to holding title in a single member LLC vs. personally, the deductibility of expenses is not effected what so ever. Even the reporting on your tax return is the exact same (Sch. E). The tax rates are the same and the nature of the income is the same (Passive Activity). Tax advantages/disadvantages would not be a valid consideration when making the decision to take title personally or in an LLC.