LLC for a Short Term Rental?

Question

Good afternoon everyone,

Newer real estate investor in North Carolina. We are under contract for a new primary residence and we have decided that we want to turn our current house into a STR. Wanted to get thoughts on if we should create an LLC for the STR. We plan on getting an extensive umbrella insurance policy but not sure if that is enough for liability. Thanks in advance.

Account Closed · Answer

@Richard A Lozano keep in mind that STR is considered to be active income so an LLC taxed as an scorp or a straight scorp would be the right choice from a tax standpoint. STR income is going to be subjected to self employment tax whether you have an entity or not.

Patricia Steiner · Answer

Please read this:  https://www.apartments.com/ren...

An LLC isn't all it was touted to be - the world has changed so much since then.  Work through the scenarios to determine the potential risk and the solution that will provide you with the best protection.

Best...

Richard A Lozano · Answer

Account Closed-  Thanks for the reply.  I've had a LTR in Colorado Springs for 6 years so I have a little experience but this STR thing seems to be a much different animal.  I'm trying to set things up right from the beginning so I really appreciate the feedback.

I've actually been doing research on properties close to your neck of the woods... Titusville, FL.  I have family in Indian Harbor beach and they love it there.

Appreciate the feedback.

Basit Siddiqi · Answer

You don't have all the information from the original poster to determine if the income would be subject to self-employment tax or not. Therefore, suggesting an entity sounds like bad or incorrect advice.

Richard A Lozano · Answer

@Vineeth Hh-  Thank you for the response.. I'm looking into proper as well.  Going to look at some local agents and see what they can offer as well.  I just started looking and I wanted to see what other's have done.  Thanks again.

Richard A Lozano · Answer

@Patricia Steiner-  Thank you for your response and the article.. very helpful.  Sounds like an LLC isn't as bulletproof as some make it out to be.  I'll continue to evaluate risk, look at tax and legal implications and go from there.  Thanks again for the article.

Vineeth Hh · Answer

Currently in same situation as you in a different state, CPA advised to setup LLC for STR and so I just did that. What are you thinking for the insurance policy for STR? Proper Insurance seems to be coming out on top given the extensive coverage although it is way more expensive than the other options

LLC for a Short Term Rental?

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