When to set up entities

Question

Good evening BP community.  If one were looking at house hacking a multi family property, at what point should you set up the entities (LLC and a trust) ?

The plan is to sell primary residence in order to have the equity in cash and utilize that cash to fund the multi family purchase and have operating capital.  We would like to utilize a trust and LLC for this (would be a 5% down FNMA loan) if that matters.

We just had the CMA sent to us and we have the ball rolling with a lender for pre-approval - we have not begun shopping for a property yet.

Thanks.

Nathan Gesner · Answer

//llc

Wale Lawal · Answer

@Michael Hill

When investing in real estate, it's important to consider setting up entities like an LLC and a trust, especially if you plan on house hacking a multi-family property. This involves discussing legal and tax implications with professionals like a real estate attorney and tax advisor to find the best structure for your situation. LLCs are commonly used for asset protection, helping to protect personal assets from property liabilities. However, it's important to note that forming an LLC doesn't guarantee full protection, and it's crucial to comply with legal requirements and manage the entity properly. It's also recommended to talk to lenders about any potential impacts on financing or loan terms when forming an LLC.A revocable living trust can provide benefits for estate planning and asset management, but it may not offer the same level of liability protection. It is important to take into account factors such as timing and costs when determining the best structure for your needs. Collaborating with legal and tax experts is essential in order to effectively navigate the complexities of forming an entity and ensure that your real estate investments are structured properly for your specific circumstances.Good luck!