Do I need to LLC?

[Kelvin Cheung]

Hey everyone, house hunting for our first Investment property! Do I need to establish an LLC and do I need to consult with a real estate attorney before I purchase my first door? Thanks!

[Stuart Udis]

@Don Konipol I believe it's worth noting the recognition of Series LLCs across state lines remains a major legal gray area. Some states do not permit formation of Series LLCs but may still allow them to do business within their borders, while others do not recognize them at all. Even if an investor operates in a state that does recognize them, it does not mean a lender or bank is required to do business with them. TX appears to be a state where they can be formed. I would imagine with your track record, banks will be more accepting of your formation documents than the person who is buying their first property or has less experience. You are also likely interacting with more sophisticated lenders than many on BP who are purchasing single family homes. TX banks are also likely more familiar with Series LLC's. There's a variation of an LLC that is acceptable in all states, but it's up to the investor to make sure their structure is accepted and won't interfere with their ability to operate their business in the state where they invest.

I otherwise agree with every point you make. Keeping yourself out of the docket is undervalued and entities are also helpful business planning tools. Nobody has a crystal ball and it's far easier to maneuver, sell membership interest, raise capital etc. if property is already titled to an entity than in your personal name. 

The lone exception in my opinion is when an investor has the ability to acquire a property with FHA financing. The ability to obtain such high leverage (if used responsibly) can have such a positive impact. If executed well, there's no better return in real estate.