Business type for owner occupied rental property in Illinois?

Question

Does anyone have suggestions of best business type for owner occupied rental building in Illinois? Like S Corp, LLC, etc.

I would like to protect myself in case of any legal issues and/or have a business deduction from my yearly taxes.

I am clearly completely new to this and I am not sure if I should contact a lawyer or accountant but I wanted to get some general feedback from those of you with experience. Thank you.

Eudith Vacio · Answer

Hi Account Closed that getting an umbrella insurance or simply calling your insurances provider to discuss your options would be helpful.

Hope that helps!

Rob Hayes · Answer

Great advice from @Jonathan Klemm and @Brie Schmidt. I'd certainly recommend talking to a CPA and an attorney but also remember that those people are in the business of selling you on those products (that's how they make a living). For someone who is just starting out I love the idea of getting an umbrella policy. The average person starting out has very few assets to protect and it's really expensive to set up and maintain those entities. You may be spending half of your cashflow on your entity!

Mike B. · Answer

@Boris Le my accountant and lawyer are in agreement that each property should be purchased in a different llc to separate the assets (from a liability perspective).

I’m not an accountant or lawyer.

Brie Schmidt · Answer

@Boris Lee - Your first hurdle will be financing. 30 year fixed conventional loans are not available if you use an entity. Most commercial lenders look for a track record of experience before working with you, so as a first time investor it may be difficult to secure that type of loan

Daniel Guerra · Answer

Account Closed LLC would be fine. Team up with a CPA (Certified Professional Accountant) that specializes in Real Estate taxes. They will be able to guide you on setting up a LLC and setting up future tax advantages.

Jonathan Klemm · Answer

Account Closed - You honestly probably don't need one and would be fine just getting an umbrella policy if you were worried about protection, but I am not a lawyer or accountant. And it's completely up to you and the amount you are willing to spend.

If you are planning on making real estate a long-term play then you should definitely be on the hunt for a good accountant and attorney. It is really helpful to plan with both of them together to ensure your entity structure makes sense for the way you are running your business.

Are you near Chicago or which part of Illinois are you in?

Scott Mac · Answer

Hi Boris,

If you talk to an "Asset Protection" attorney, vs. someone that just forms entities, you will probably get the information you want.

Look local online in your state, and be prepared to cut a check for the info and assistance.

Good Luck!

Scott Swanson · Answer

Boris,

Most of my investors use an LLC. Eudith mentioned that you can't transfer a purchased a property from your name into an LLC, without possibly triggering a due on sale clause. I'm not a lawyer, but quite a few of my new investors purchased Illinois properties in their name and then transferred them to an LLC. So far none of them have had any problems doing so. Best of luck.

Business type for owner occupied rental property in Illinois?

Business type for owner occupied rental property in Illinois?

Most Popular Reply

8 Replies