Good morning all, I was hoping someone could help me with a tax/LLC question for a house I co-own with my younger brother. Quick backstory:
I bought the house in 2006 (I know, peak of the bubble) with a friend of mine and we lived in it while having various renters over the years to help cover the mortgage. Fast forward to a few years ago, I moved out of state for a new job, and my younger brother moved in and started renting it from me. Earlier this year we refinanced my friend off the loan and added my brother to it, as well as dropped the payment. He is currently living the property and renting a couple rooms out to live rent free.
My question(s): Can we create an LLC now, while he is still living the property, to collect rent from his roommates? Are there special procedures to do this? Or can an owner-occupied property not be an LLC? I'm not sure of the rules for this scenario.
Eventually he will move out and we will convert it to a full rental and obviously we'd use an LLC at that time, but I'm not sure about what to do in the meantime. I appreciate any thoughts, thanks!
@Dan Kowalski - If you have a LLC you need a commercial loan. 3 year residential loans can only be made to people.
If your brother is an owner and has renters, you would just report their portion of the income and expense on your Schedule E. Just like if you own a duplex and live in half, half of the expenses got on your Schedule E
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