I am in the process of converting my primary residence in 78745 into a rental property as I am purchasing a new primary residence. How important is it for me to protect this asset in an LLC? I want to grow this business in the coming years by acquiring more properties and want to set myself up for success from an asset protection perspective. I also understand that I will be able to deduct business expenses if I form an LLC for my rental business.
Any thoughts on if this is overkill or not?
@Daniel Tisdale one of the most popular questions on BiggerPockets and unfortunately there is no perfect answer. Search this one on the forums, there are some detailed threads with great responses.
I would also look into umbrella insurance for protection, but talk with your attorney and/or CPA for structuring purposes. Do not let the absence of a LLC stop you from growing your portfolio. You can adjust portfolio structuring specifics later if thats the best option for you. And if you have considerable assets to protect, definitely consult your attorney.
@Bryan is correct. An LLC is the most custom business entity you can have. To do it right you need to review the entity structure, the tax structure (with a CPA) and your insurance coverage. An LLC is the right way to start "operating like a business" but you need to be clear on what you want out of a business before you form it. Some simple first questions - (1) are you fully insured (goes to the concern about liability protection), (2) are you brining on other investors (they have to have something to invest in) (3) do you need financing to build out your real estate portfolio (can you get a lender to give money to a brand new LLC?).