Should I setup entity enterprise before starting out in REI?

[Tom Kairys]

Hi,

I am new in this field. However, I been in construction, sub-contractor, in particular, flooring and remodeling for 16 years. Looking to transition from physical labor and earned income to more of the passive income. Love Real Estate and the potential it has to offer. Just came out of the Rich Dad's/ Legacy Education 3-day seminar where they tried to sell me really expensive packages. I didn't buy into it. However, they talked about Asset Protection and how we have to buy real estate on the LLC rather than on your own name. Just wondering if anybody can help with the advice of whether I would first have to set up the LLCs or just start out by buying on my own name? Also, which route is best to take to start out in real estate investing if I have $70,000 of my own money and credit score is 705. Any guidance would be appreciated.

[Percy N.]

@Cody Zimmer, that is correct.

At a very high level.....

You can limit liability via insurance and get easier loans if you keep things in your personal name

OR

You can limit liability via an entity (e.g. LLC) BUT getting loans becomes much harder since Fannie Mae and Freddie Mac do not make loans to LLC (except delayed financing).

There are other reasons one might need an entity, so talk to your attorney and CPA to determine which option is best for you.

I buy in my LLC but I am also a cash buyer.