Should I Create an LLC?

Question

I currently only have 1 property so it may be too soon to ask this but I was wondering if it would be beneficial to create an LLC. I plan on acquiring more properties and didn't know if an LLC would make a difference on my income tax or how any of that works. Any advice on this helps, thanks!

Mike S. · Answer

@Dalton Ward

As said above, if you had taken the time to search this forum you would have found the same question asked probably every week. Some of them have very long detailed answers about the pro and cons of using LLC.

You would understand that if you don’t want to spend the time to search for answers before asking your question, why should we spend the time to answer your question and waste our time.

On the other hand, if after doing your basic research you would have asked a specific question on LLC about something you need more clarification on because you are still confused about some of the answers found, you would probably get many more answers as it would contribute to the general knowledge of this forum.

Terrell Garren · Answer

Use the search function my friend. This question has been asked and answered literally hundreds of times.

Kerry Baird · Answer

I had over a dozen houses before using an entity. Financing is a pain with the entity, even if Fannie Mae allows single member LLCs. It isn’t commonly enough known by any local lenders I’ve spoken with. They are confused and a confused mind says no. I chose to use a portfolio lender for the LLC, and so rates are in the 7% range. My lender/s won’t allow owners or family members to occupy a house that they have encumbered.You will have to open business accounts at the bank, learn how to sign checks with the entity as signatory, how to make owner contributions and not co-mingle funds. Not terribly difficult, but new. Appraisals cost $550 because they are commercial appraisals. Insurance is different. It’s a lot of extra work, and you don’t know enough to know whether this decision to run rental property has staying power.

Brandon Hicks · Answer

@Dalton Ward

There’s a huge benefit to the search option in that you can get your answer almost immediately vs having to wait and getting a notification every time someone posts in the thread.

I use it here and on Facebook groups because notifications are one of the biggest threats to productivity. You get one...you HAVE to look and then something else catches your attention and it’s 20-30 min before you’re back on task.

James Williams · Answer

@Mike S. Note to self. Do my research before posting a question. Makes sense.

Angela Ruggles · Answer

@Dalton Ward

We are closing on our first duplex this Friday.

I created an LLC with my husband and I as the members.

I did it on Indianaregisteredagent.com

It was around $300.00 including a year of registered agent service. That fee is $49 a year after that.

I didn't know what a registered agent was so I'm going to assume you don't either.

Their name is on everything. They receive all my important mail and tax documents. We use their physical address. They don't have any control over the LLC. This keeps us anonymous. Our name isn't on anything. The new duplex was bought with cash from a HELOC and our LLC name will  go on the deed/title.

Dalton Ward · Answer

@Terrell Garren Thanks for the input but do you have an answer to the question?

Mason DeJarnett · Answer

@Dalton Ward I do- thus my answer saying so. If you plan on making it a business and growing- why wait? Again, ask a local real estate attorney that you plan on working with- they can give you plenty of insight.

Dalton Ward · Answer

@Mason DeJarnett Thank you for the input. I agree that I want to have that business mindset and not as a hobby but do you think it would be wise to create one now with only 1 property? My biggest concern is that the business itself wouldn’t be taken seriously because of the minimal portfolio.

Mason DeJarnett · Answer

@Dalton Ward this community is extremely giving and has a wealth of knowledge. I think you’ll find it extremely beneficial as I have- and I continue to refer every person I meet in real estate here. I agree with the assessment to search out the topic on here in detail- you’ll be blown away at the amount of time and energy poured into it. Don’t take one response for it against it without fully weighing it out.

I personally say yes to LLC. The reason being- it not only gives you protection (consult your attorney and CPA for how) but it gives you credibility, and the confidence of “I own this business and am going to make something of it.” While the legal side is the most important- I think it’s important to not treat this like a hobby. Too much at risk in liability if all kinds to treat it like one. If you don’t have a real estate attorney or CPA as a friend, better make one quick. :)

Should I Create an LLC?

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