Lansing, MI · Member since 2016 · 31 posts · 3 votes
I'm about to close on my first house, which will be a house hack. From what I understand, it's not worth getting an LLC until you have enough properties. I will be getting an umbrella insurance plan, but house much is "enough" to get an LLC in your opinion.
Investor · Fort Wayne, IN · Member since 2016 · 48 posts · 13 votes
9y
If this is your 1st house and you'll be living in it as well, I don't think you need an LLC. What you do need is a solid lease, an up to code home, and good tenant screening.
LLC basically protects you from losing your primary home or other assets in your personal name due to an incident at a rental where someone wants to sue you. Do you own any other significant assets? Unless you own multiple properties, you really don't need an LLC, but that is entirely up to you.
Investor · Fort Collins, CO · Member since 2017 · 169 posts · 119 votes
9y
My advice is set up an LLC right away. You want to be protected in the case of a legal situation. Even if you have to go to court over a 20$ item and are found personally liable to pay that judgment, your credit will get hit and your ability to buy more investment property will be hindered because of that small judgment against you, I believe for 7 years... The LLC protects you personally from these small claims and bigger ones.
My suggestion is to have a tax attorney/CPA set up a new LLC for each property you buy. Create one parent LLC that manages all the child LLCs. Have an independent LLC for each property so they are all isolated from the others. If something happens at property 1, you don't want the assets from property 2-10 to be in jeopardy.
LLCs are easy to set up and cheap, 200-500$ depending on the complexity and who you have prepare them. You can even probably do this yourself online for cheaper, but I have a lawyer do mine so they are filed correctly. You can set this up after you close on the property and quit-claim the house into the LLC after closing, but also make sure your loan doesn't have a "due on sale" clause making your loan come due because you transferred the property. Most don't anymore since you are personally liable for the mortgage note, it's not solely tied to the property but check first.
Feel free to reach out directly if you have any more specific questions on this. Good luck!
My advice is you will not need a LLC until you hire employees. Insurance will always be your first line of defence regardless of whether you have a LLC or not.
Stats show about 50% of real estate investors use a LLC and to this date none on BP have posted actually having first hand experience in using the LLC as protection against a suite.
A LLC is more of a psychological protection and will make it more difficult to invest in the future. Getting financing will be difficult and banks will still want you yo be personally liable for the loan.