Real Estate Business Entity-LLC

[Dhiren Ahir]

Hello,

I have acquired 7 SFR so far. Mortgages are all under me personally. I would like to create business entity and put them under it. How would I go about it?

[Savannah Wallace]

For any investment of real estate, I'm going to recommend placing each property into an LLC for asset protection.

LLCs can help shield you from personal liability if a tenant were to ever sue as well as offer protection against creditors in case of a personal judgement through charging order protection, when the LLC has been structured appropriately. With the property in an LLC if someone were to sue the property the could only go after the assets in the LLC and not anything else (assuming you did not guarantee anything personally and the corporate veil has not been pierced).

Also, depending on the structure, you can keep your name off the public record as the owner of the property and even as part of the LLC. For my clients, I recommend that they place the properties in an LLC that has been formed in the state where the property is located and have the member of that LLC be a Wyoming LLC. This provides for both anonymity as well as charging order protection.

Depending on he type of mortgage on the property, if you're looking at moving the properties out of your name and into LLCs, then you may benefit from a land trust. Depending on the terms of the mortgage, transferring the property to an LLC may be considered a sale, thus triggering the due on sale clause. However, putting it into a land trust first avoids triggering the due on sale clause.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, or financial advice. No attorney-client, fiduciary, or professional relationship is established through this communication.