All Forum Posts by: Luke Johnson

@Lawrence Potts Thanks for all that great info. Unfortunately that is exactly what I was finding when we went to do this the first time and why we switched to purchasing on our own. Spending more time to prep before this next purchase I wanted to put his question out for this exact reason. At this point an LLC doesn't seem to be the tool to get both parties what they are looking for in our real estate investing. We will likely be back to my wife and I pursuing our next purchase on our own. I really appreciate all the information. Thank you!

Quote from @Chris Picciurro:

Interesting situation - just consider that an LLC doesn't provide additional tax deductions in this case. Ordinary and necessary expenses are deductible. The LLC provides asset protection (still valuable). You also have to consider property taxes on a non-homesteaded property. If you reside in one of the units (house hack) then 2/3 of the property would be consider a rental property business. That activity will be reported on your personal return or, if a multi-member LLC if formed, a partnership return - Form 1065. Maybe your family member would consider being a lender and you own the property.....

Thanks for the info Chris. We thought about that route for our first property but things got confusing with gift letters verses being a lender. In the end we decided to just purchase the property on our own with a 3.5% down FHA loan. I'm curious, what benefits would he have by being a lender (I'm assuming you mean lending the down payment amount) instead of buying a property in a multi-member LLC?  

My wife and I bought our first property in June of 2021. We are househacking a triplex where we rent two units out and live in the 3rd unit while renovating. We are now looking to move on to our next property. 

A family member saw our success with the first property and wants to get into real estate with us under a LLC. He is attracted to the tax benefits of operating out of an LLC to offset a high W2 income. He also wants the liability coverage of an LLC instead of an umbrella policy. The basics of how we would operate our next property would be, he provides the capital for the down payment and we put in the sweat equity and maintenance. What I am curious about is what can be claimed when we go to do taxes if we purchase under an LLC and live in one of the units. I believe we could only claim the portion that we aren't living in but could the other member claim the whole property?

I'm also curious about the best type of financing for something along these lines?