First time homebuyer and LLC- Do’s and Don’ts

General Landlording & Rental Properties
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First time homebuyer and LLC- Do’s and Don’ts

Julio Salado
Boston, MA · Member since 2014 · 25 posts · 7 votes

I bought my first home this fall. A two family. I then created an LLC. I bought the home under my name. The LLC is for real estate.

I'm new to this at thought LLC is good for tax purposes.

I've done a lot of home improvement and been writing checks with the LLC account.

I was just told that I should not have the rental payable to LLC since it's my primary residence.

Could some one give a quick crash course on top Do's and Don'ts with LLC?

I’m going to look for an account too.

Thank you in advance 

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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
7y

Agreed, you really shouldn’t own your personal residence in an llc....using it to own other properties is debatable.  But you definitely shouldn’t be using an llc to pay for repairs on your personal residence or any other property you own personally.

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  • Shmuel Waldman
    Member since 2018 · 124 posts · 53 votes
    7y

    Best to get advise from your personal Tax professional 

    Laws change in different States/Counties etc. 

    Local experts will always give you the best answers for your case

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    7y

    Agreed, you really shouldn’t own your personal residence in an llc....using it to own other properties is debatable.  But you definitely shouldn’t be using an llc to pay for repairs on your personal residence or any other property you own personally.

    1Reply
  • Michael Gefvert
    Attorney · Columbus, OH · Member since 2018 · 55 posts · 47 votes
    7y

    In addition to an accountant, you should consult an attorney on how to use your LLC to limit your personal liability which is really what it's for. The way you have it set up now according to your description, it isn't going to protect you if your tenant sues you.

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  • Julio Salado
    OP
    Boston, MA · Member since 2014 · 25 posts · 7 votes
    7y

    Thanks for the replies. I live upstairs and was going to rent out the first floor. I do not have a tenant yet. 

    I'll stop paying contract work for the unit and overall property thru the LLC.

    Next step is an accountant and go from there. It's only been a month with the new home and opening up the LLC.

    I hope that the payments I made to the contractors with the LLC account won't negatively affect me with taxes etc.

    I’ll find out soon enough.

    Thanks again 

    1Reply
  • Mike S.
    Investor · Broward County, FL · Member since 2018 · 1k+ posts · 938 votes
    7y
    @Julio Salado In general LLC has nothing to do with taxes. It is supposed to be tax neutral. In fact it may even create some more tax return complexity but should not increase nor decrease your tax. LLC are mainly used for liability and asset protection. They are also used when you are investing with other people in the same project. LLC will also increase your paperwork and bookkeeping, and make obtaining loan more difficult. As a whole LLC are great tools to use in real estate, but you need to understand first their pro and con as it is not the magic bullet solution for every situation.
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  • Julio Salado
    OP
    Boston, MA · Member since 2014 · 25 posts · 7 votes
    7y

    It was suggested by few established brokers to create an LLC after I bought my first home/two family. So I did that.

    Now I’m learning as I go

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  • Ahad AliPro Member
    CPA/Investor · Bronx, NY · Member since 2018 · 236 posts · 45 votes
    7y
    @Julio Salado Get a free consultation with a CPA, you can weigh your options together and reach a beneficial decision.
    0Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y
    @Julio Salado. Llc does nothing for taxes. You get al the same deductions without it. I looked into this, if you’re buying residential leveraged real estate is not worth It. Not tax advice
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