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Karen Tan
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What should go into a LLC for STRs?

Karen Tan
Posted Jan 21 2024, 10:03

I've always heard to use LLC for an extra layer of protection and to not co-mingle funds, but how is this actually executed and what are all the things that should go into the LLC? So the property should be deeded in the LLC, or can it be leased to the LLC? Are bank accounts and insurance policies taken by the LLC? What if the STR doesn't generate positive cash flow and I need to cover from elsewhere? Should the Airbnb account be opened by the LLC so the renter is contracted with the LLC? What else should be considered?

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Andrew Postell
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Andrew Postell
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Replied Jan 21 2024, 10:37

@Karen Tan this is a very difficult question to answer. Most of the time the people talking about this aren't attorneys. I mean, some attorneys do speak about it...but a lot of the time it's someone selling something that nearly impossible for the beginning level investor to really do. I'm not saying this from as an attorney either - so take what I'm saying with some salt as well. But every attorney I've ever interviewed can get around most people's LLC "shielding" in about 2 minutes. It would take about $10,000 - $15,000 to really get everything iron clad. And I can feel it now - someone out there will say "I can create an LLC for way less"...but I'm not taking about JUST the LLC step. I'm talking about the other 30 steps you would need to take to truly have separation. Anderson Advisors is one of the places that does all of this and you can check them out HERE.  I would certainly encourage you to continue researching this before you start spending money on it.  And again, this is just my 20+ year real estate investor opinion on this.

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Mitchell Zoll
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Mitchell Zoll
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Replied Jan 22 2024, 08:42

This is a lot easier than folks make it but it requires thinking about this correctly. Here's the important part: You are not your LLC.

You aren't "shielding" YOUR assets, you are removing the assets from your personal ownership and giving them to an entirely separate entity.  If you need to run this as a business through an entity (and talk with an attorney before you make that decision), then do that. Own the property in the name of the entity, take in the rent through the entity, get the mortgage in the entity, and communicate with tenants, vendors, etc as the entity.  Don't put some parts - the property/lease/bank accounts - in the name of the entity without taking to a lawyer who has handled a case in court and can tell you how these cases play out. Use the lawyer to learn to operate the business, not just to fill out forms. 

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