LLC question and new investor inroduction
Hi! My name is Reed Olson and my parents recently purchased three single family properties in Winona MN all directly next to each other and I am managing them since I work here. My question is first, they have formed one LLC and will that entity offer enough protections for all three properties or should they open three separate LLC's. Second I'm planning on buying one from them next year and house hacking it. Would it be better to purchase a separate property to house hack so they can have a larger investment portfolio or to buy it from them to maybe keep it less risky and more simple since I already know the property?
Thank you I hope the questions made sense!
@Reed Olson Welcome to BP! Both of those questions are probably best suited to an attorney and a CPA / financial advisor that knows yours and your parents finances. They would be in the best position to offer sound advice.
Good luck and congrats on the recent purchases!
Everyone has different opinions on the LLC question. My take on it is that one LLC and an umbrella insurance policy should offer all the protection you need. As far as your second question goes, that really comes down to what you're comfortable with. If it were me, I would look for a separate property, preferably a duplex, to house hack.
It's a trade off between risk mitigation vs. cost (monetary and complexity). The benefit of 3LLCs is probably marginal, assuming the property values of those SFRs aren't very high.
On house hacking -- do your parents plan to sell? :D
Nice to see a fellow Midwesterner on the forums! When you purchase from your parents, purchase in 1 LLC. I like to have 10 properties maximum in an LLC or $1M maximum. If the owners and strategy is the same, you can stick to the same LLC. I absolutely agree with @Nick Buonanno's umbrella policy recommendation. That is more important than having it in an LLC.
House hacking happens when you live in the property and rent out another part of it. Are you planning to do this with one of the houses? It would be easier to purchase one of your parents' properties to do this but definitely not a huge difference to buy another one.
I'm in Winona too! Welcome. Did your parents buy those three houses on Grand street?
Yes they did
Hi Reed! Congrats on getting started, managing properties is a great experience. I managed a couple hundred doors for awhile and learned tons. Feel free to reach out with any questions.