Should I start an LLC ... WHY OR WHY NOT?!? HELP

9 Replies

I started mine early... too early. Do you have rental properties? If so, maybe an LLC is a good idea. If not, then not yet. This question slowed me WAY down. If you're just getting started then go out and land deals, worry about asset protection when you have assets to protect. That's my two cents :)

@Charlie Moore

What's your REI long-term vision? If you're only planning on owning a couple properties, keep then in your name. If you've already made up your mind that you WILL be successful and you WILL grow a portfolio, then do it now! It's simple and cheap to do anyways (at least it was for me in OH).

Also, from my understanding if you finance in your personal name now (using a conventional loan) and then you start an LLC later, you won't be able to move it to your LLC.

@Charlie Moore In my opinion if you have more than a handful of properties you should consider an asset protection structure.  When we invest in real estate we take a higher gamble than most at being a target for litigation.  That being said, we have to put things in place such as LLCs to protect our assets.  Check out this article, it may help in bringing about some deciding factors for you: https://www.biggerpockets.com/blog/pass-through-entities-real-estate-investors/

The time may or may not be right for you.  The best answer is always "it depends."  

If you have any questions feel free to leave a reply or DM.  

@Charlie Moore - here are some ideas to help. I waited on an LLC until I had about ten multifamily homes(mostly 2 and 3 unit houses.) I wish I could say it was a logical thought process that caused me to start an LLC, but actually a drug dealer took over two of three units in a house, turned it into a pharmacy(not a legal one, of course,) the cops initiated a no-knock warrant, they knocked the door down the day after Christmas, the pipes froze after the drug dealers were hauled off, and just general pandemonium ensued from there! So my wife kinda panicked, and said, "Maybe you should put your houses in an LLC?"(there was actually a good bit of yelling and some words that I can't put here, but I'm PG-13'ing it down for the wider BP audience.)

Where was I? Oh yes, Pros and Cons. 

Pros: Asset protection(though it's imperfect,) anonymity(though that too is imperfect,) gravitas and name recognition(though...well, you get the idea.)

Cons: Cost, sometimes harder to get loans(this one depends on a few factors.)

Hope this helps, MG

@Charlie Moore

Congrats on having three properties! In that case I would say you're absolutely ready to start thinking about asset protection. I will agree with @Michael Gansberg that getting a loan through the LLC is hard, and hard I would say is an understatement... I'm purchasing in my name and then transferring to my LLC, but there are risks in doing it.