3 friends just starting out & have questions

[Siwei Tang]

(Sorry, new to bigger pockets and tried to post on two forums. Apologies if you read this in the tax forum already!) 

Hi BP community!

My two friends and I are just starting in the investment property business and are looking to buy and hold properties in Euclid, OH (also maybe chicago?). We are new to this and hoping to get some help from the community!

We have some initial questions we were hoping the community can help answer or point us in the right direction?

1. We were thinking of forming a LLC in Delaware so that if anything happens, we are not personally held responsible. However, because we are all based on California, does this mean we have to pay annual renewal/operating fees in California & Delaware. If so, we think it will total $1100/year, but this will definitely wipe out any profit we see. Have people purchased in a group and without a LLC before? We would love to hear advice on pros & cons. If we don't elect to go with a LLC, is the solution to have a bigger insurance plan?
2. How would purchasing a rental property affect our taxes with and without a LLC? Would we typically be paying more or less in taxes? Our salaries are currently in the $100K-$150K range. I currently own a condo as my primary residence and my two friends do not own property.

The three of us are long-time college friends and we want to maintain our friendship. I am assuming we should have a contract drawn out for the three of us with the guiding rules, but open to the community suggestions as well.

Also, any recommendations for property management companies in Euclid, OH or Chicago, IL? We would love to have recommendations for tax accountants and lawyers too!

Thanks,

Siwei