Should I form an LLC?

[Robin Castillo]

Hi all, 

Will be starting out as an investor mostly buy and hold. Currently working on my credit and saving some more but should be ready in a year or less. I have different strategies in mind but my main concern is if I should start an LLC now or after I buy a few properties? I'll be focusing on multifamily and might house hack, thank you for the help!!

[Katie Smith]

Hey Robin!

Starting an LLC before purchasing properties can be a great idea, especially if you're focusing on multifamily and buy-and-hold strategies. An LLC can help protect your personal assets by limiting liability, and it also allows you to establish business credit early, which can be useful as you scale your portfolio. Plus, having an LLC in place from the start can streamline the process of acquiring and managing properties under a business entity. It's something worth considering before your first purchase!

[John Mason]

LLC will not protect you ..Land Trusts and Umbrella Insurance can

[Gino Barbaro]

@Robin Castillo

i don't think you need to create an entity until you do your first deal. 

[Wale Lawal]

@Robin Castillo

Starting an LLC before buying properties offers benefits like liability protection, tax flexibility, and professional image. However, it can lead to lender complications and complicated financing. Some investors prefer buying properties personally and transferring them into the LLC. Starting an LLC after purchasing properties can help understand investing style, asset protection needs, and business growth. Consulting with a real estate attorney or CPA is recommended.

Good luck!

[Luke Bricca]

@Robin Castillo

LLCs are useful for legal protection, but they require separate tax filing, typically cost several hundred dollars to create, and most non-commercial lenders will not lend to LLCs.

Commercial lenders will lend to LLCs, but their interest rates are significantly higher and they require collateral that regular lenders don't.

I would not create a LLC specifically due to the issues in getting a traditional mortgage it will likely cause.

One potential route though, is to get a traditional mortgage in your name and then assume the loan after a 6mo "seasoning" period with your LLC. In some cases, your lender will not allow this or will call the note due, but this is pretty rare.

[Ashish Acharya]

@Robin Castillo It's not necessary to form an LLC right away. It doesn't give you any tax benefit. Many investors wait until they've acquired a few properties to avoid the costs and administrative work. An LLC offers liability protection by separating personal assets from investment properties, which is important for multifamily properties and house hacking. Some investors buy in their name and transfer properties to an LLC later, though this may trigger due-on-sale clauses.