Newbie looking for advice
Hi, I’m new to real estate investing. I plan on having my first property by next year. Should I start a Wyoming Llc? Is it necessary?
@Frederick Gilpin Are you in Wyoming? if so, then at some point it will make sense to create an entity... I have both LLC's and S Corps depending on the investment.
If you aren't in Wyoming and just heard the idea of a "Wyoming" entity because the tax is lower than your own state, definitely get the advice from a real estate tax person. KKOS lawyers are who I used for everything. My understanding is you pay taxes in whichever state you transact business.
@Frederick Gilpin Welcome to BP bud. There are lots of opinions on that subject. While I like LLCs, let me just tell you the pro's and con's. First are you a high wealth person, or will the house be a large part of your total net worth. The reason I ask is that LLCs are y
to protect your welath. The less wealth you have the less reason to worry about getting an LLC right away. You can always form an LLC later and transfer the property into it later. I would suggest getting an LLC in the state you are going to invest in. Wyoming has great LLC laws, but the law of the state the property is located in is the law that will apply, not Wyoming law. Next you will have to get a loan and you will have to personally guaranty the loan anyway, but in my experience getting a loan in an LLC costs about 1% higher in interest than getting a loan in your personal name.
Anonymity is nice, but if you will be the one making offers, cleaning it up, hiring contractors, buying insurance, screening renters, signing leases, etc. you probably won't have any anonymity. Now if you have everything done by a property manager you could probably get anonymity. You won't have to get an EIN number if you you are the only member and you can put the property on your own 1040 tax return unless you elect certain tax treatment. That will save having to prepare a separate tax return for your LLC.
If this is your first property I don't see a lot of difference. Maybe try it in your own name first and see how it goes. If you like it and want to do more then form an LLC and move the property into it then.
LLCs are cheap to form, but you need to educate yourself on them to make sure you run them correctly, or you could lose the benefit they confer. Some folks have a separate LLC for every property, but I lump multiple properties into one company until it gets big.
The most important thing is to take action. Too many folks get worried about everything but getting the property. Figure out the local market, then buy a property that will cash flow. Figure it out from there.
