Is it best to get an investment property in my name or LLC?

Question

Brittaney Woods · Answer

Thanks everyone. Not sure if this matters but I am getting it owner financed and the mortgage will be amortized over 30 years and due in 3-5 years ( we haven't decided yet).

Bill Gulley · Answer

Don't start an LLC until you have better reasons to have a business entity than asset protection. With a SFD, you have more risk exposure by driving you car!

Good management + insurance = sleeping well at nights.

Concentrate on your management duties keeping the property in good condition. If you are not negligent, you're not at fault.

And.....what assets are most trying to protect? Maybe many shouldn't be driving..... LOL :)

Jared McKie · Answer

I was the same situation with my first duplex. I purchased in my name because of financing reasons and when I first spoke to several banks/lenders if it were to be purchased in the LLC which would have been created for that specific reason that entity wouldn't have had any real credit history thus they would have a harder time lending. In addition, it would have been a commercial loan and >25 % down would have been required. I would seek a lawyers opinion who practices real estate in your state. Depending on what your risk tolerance is and if you do obtain a loan that has a due on sale clause such as mine does you would have to hedge your bets against the lender enforcing that if you transfer it after the sale.

Ultimately after working with an attorney I've transferred it into an LLC and didn't come across any issues but everyone's situation is different.

-Jared

John C S. · Answer

LLC is the way to go for buy and hold. If you want to protect your assets. Listen to podcast 109 then  seek a lawyer

John K. · Answer

@Brittaney Woods

Just like someone else has said search BP for LLC you will find tons of information. I am in the same boat trying to learn what is best, and even with all the information provided it is still hard to understand everything.

Many will say yes it is the best way to go as you are protecting yourself from any potential mishaps in the future. Also some will say you can do just fine with a umbrella policy or just do both.

The thing with us new investors it is near impossible to get a property financed under a new LLC. Simply because our lack of knowledge and credibility. With that being said if you do purchase the property you can later transfer the deed over to the LLC, but you run the risk of the banks due on sale clause. Again I am still learning my self, but you can look it up and find more on that.

What confuses me is people still say it is a good idea for new investors to stat an LLC for protection, but how does it protect my assets if the property is not even under the LLC to begin with...

Brittaney Woods · Answer

It will be a buy and hold.

Christopher Telles · Answer

What do you plan on doing with the property?

Live in it? Renting to hold long term? Wholesaling it? Flipping it?

Holding a property in a legal entity such as an LLC, Corporation, or Limited Partnership can mitigate some of the liability risks associated with real estate ownership.

I'm of the opinion that if you can afford to create an ownership entity for investment property thats the soundest way to take title to the property. I prefer single asset entities, but have bought property through my operating entity when the hold term was relatively short.

If you are wholesaling or flipping it and will only own it for a short period of time then buying it personally wouldn't be the worst thing (people buy and sell property in their person everyday) but you'll want to at least be aware of some of the potential risks in so doing.

If your intention is to hold long term then it might be a wise decision to create a legal entity to take title and operate the property from during the course of your ownership.

In addition to getting sound legal advise from an attorney that can help you form the entity (or researching the creation and operation of the entity if you DIY) you'll want to either speak with your accounting or tax professional, or fully understand the accounting impacts of the entity.

Yoochul C. · Answer

Theres alot of topics on this.  Search BP on this topic.  There is no end to this discussion.