LLC before or after?

Question

Hi before I begin investing in any type  of real estate, should I create an LLC?

Tom S. · Answer

@Brian Mello

I respectfully disagree with Baylus's advice above unless you're paying with cash.  Many banks will NOT lend to LLC's, so keep that in mind.

- Tom

Stuart Birdsong · Answer

Brian,

There are a lot of layers to that question. Before I proceed, I want to let you know I am not a lawyer and I am only sharing an opinion based on my personal experience. You most likely do not need an LLC  before you get into investing in Real Estate. If you are purchasing a Buy and Hold property, with lending, you must first buy the property in you name and then transfer the title(Quit Claim Deed) into an LLC. This is a smart thing to do, in order to protect you and your assets from being subject to a lawsuit. But this is just one approach.

The most important thing for you to do would be to talk to a Lawyer about your plans and listen to their advise regarding the best way to go about executing your plans. Lawyers are great when they are looking out for your best interest. Best of luck to you!

Stuart

Baylus D. Nicholson · Answer

Hello, Brian

There are a few ways to effectively use a LLC when investing for real estate.

FOR BUY AND HOLDING REAL ESTATE

***GOOD***-If you plan to hold real estate, the safest and most risk avoidance way to use an LLC, is to set up a LLC for each and every single property that you will own. the reason being is that if you are sued and are at fault then they can only take as much from you that is in the LLC. lets put it this way. you have 4 properties, Total value $200,000. each of them have a LLC and are valued at $50,000 each. if a person is hurt for some reason and they find you at fault for it, the person can seek $200,000 in medical payments from that LLC totaling the value of the LLC. in other words they can only take $50,000 and not the total of $200,000 in value, and your 3 other properties are safe.

***BAD***-If you used 1 LLC to cover all 4 properties something like this could happen, you have 4 properties, Total value $200,000. and one LLC covers all 4. If a person was hurt at one of the properties, all of the properties are a risk. If a person is hurt for some reason and they find you at fault for it, the person can seek $200,000 in medical payments from that LLC totaling the value of the LLC, in this case its $200,000. since there was only one LLC used for all the properties all of the properties can be sold to settle the debts owed.

I AM NOT A LEAGAL EXPERT!!!

FOR ANY MORE LEAGAL ADVICE ASK A LAWYER!

hope this help you out!

LLC before or after?

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