Rehabbing & House Flipping

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Joshua Brito
  • Rental Property Investor
  • Espanola, NM
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Should i Start an LLC for note investing in real estate flips?

Joshua Brito
  • Rental Property Investor
  • Espanola, NM
Posted Oct 14 2022, 13:33

I have just started Note Investing with a local house flipper/Investor and i plan to continue doing so. My question is should i create my own LLC for this, and how complicated does it make it to pay my self from the LLC especially if i want to take out all the cash i originally invested out of the LLC?

Or would it be easier to continue doing it without one.

Thanks in Advance

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William Harvey#1 Rehabbing & House Flipping Contributor
  • Investor
  • Ashburn, VA
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William Harvey#1 Rehabbing & House Flipping Contributor
  • Investor
  • Ashburn, VA
Replied Oct 14 2022, 13:57

I would create a LLC. I'm not an attorney and this certainly isn't legal advice, but if not for anything else, it is much "cleaner" to have a separate entity and bank account that you are doing business from.

It isn't complicated to pay yourself at all. I'd look into whether it makes sense to treat it as a partnership or S-corp for tax purposes and you'll get clarity on this. By default, I believe all LLC's are initially classified as partnerships, but you can elect to be classified as an S-corp by sending in a form to the IRS.

Also, if you have a separate bank account for the entity, this makes tracking income/expenses much easier too since it isn't blended with your personal account. I'd talk to a competent CPA and they can help you here with how to be treated for tax purposes. Hope this helps! 

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Chris Seveney
  • Investor
  • Northern Virginia
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Chris Seveney
  • Investor
  • Northern Virginia
Replied Oct 15 2022, 05:58

@Joshua Brito

If you are doing note investing (this is what we do), you will want an entity

The entity type should be discussed with your attorney and cpa as with a LLC you cannot take a salary you take distributions but need profit to take it but with an s Corp for example you can take a salary

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Replied Oct 15 2022, 06:02
Quote from @Joshua Brito:

I have just started Note Investing with a local house flipper/Investor and i plan to continue doing so. My question is should i create my own LLC for this, and how complicated does it make it to pay my self from the LLC especially if i want to take out all the cash i originally invested out of the LLC?

Or would it be easier to continue doing it without one.

Thanks in Advance

You really need to ask a real estate attorney rather than us lay people on this forum. We are not familiar with the laws in your state and for something as serious as this I really think you should defer to the professionals. Sorry. 

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Richard Bechtol
  • Attorney
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Richard Bechtol
  • Attorney
Replied Oct 15 2022, 14:32

I think an LLC would be a good idea. It minimizes your liability. For the payment of yourself, I would speak with a CPA but by default an LLC is taxed as a disregarded entity but a CPA may advise you to form an S-Corp.

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Nate Sanow
  • I​nvestor & Agent
  • Tulsa, OK
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Nate Sanow
  • I​nvestor & Agent
  • Tulsa, OK
Replied Oct 15 2022, 14:35

Yes.definitely get one.