To LLC or not to LLC?

Question

Hi all,

I'm currently at the point where I'd like to actively pursue my first investment property, but I'm wrestling with whether or not to set up an LLC.  From my understanding, if I'm going to set up an LLC, that's the first thing I need to do before I get preapproved, since it has to be through the LLC?  Just looking to see what people's thoughts are on this.  It seems for a lot of people that an LLC is more for peace of mind.  Thanks in advance for comments!

Dillon

Thomas S. · Answer

LLC is physiological piece of mind and mental pain in the butt.

Not necessary with adequate insurance coverage.

Steven Stokes · Answer

To be very honest, you should talk to a good real estate attorney and tax professional about your specific situation. What makes sense for me or anyone on here may not make sense for your situation or for where you live. For some umbrella insurance is enough, for others an LLC is the right move and for other a trust is the best route. But just like a good doctor would not diagnose your condition over the internet, giving you specific advice about your personal situation is just as bad.

It's good to know what your options are when you do talk to a professional on your team (I'm assuming you are building a team).

But this should not delay or slow down your investing plans.

I hope this helped. Good luck.

Stephen

It's good to know what your options are when you do talk to a professional on your team (I'm assuming you are building a team).

But this should not delay or slow down your investing plans.

I hope this helped. Good luck.

Stephen

Nathan Shepard · Answer

Account Closed I'm no expert as i'm just getting started myself, But I  set the LLC up before I've made any further progress. The LLC gives me a great peace of mind for whenever I make the jump into the world of investing. My main concern was protecting my primary residence should I have any mishaps and run into trouble.

Reading through some of the posts on BP I've hear of people with extensive portfolios setting up several LLC's and only putting 2/3 properties under each one. That way if a tenant tries to sue, they can only go after the funds of 2/3 properties instead of their whole collection of properties.

From what I understand on the pre-approval, if you try to get a loan under a new company, that doesn't have any credit history. You then essentially back the loan with your personal credit, though you should still be fully protected by the Limited Liability.

I'm still a little fuzzy on the details, but responding to posts and thinking out loud to myself really helps me understand the topic better in my own respect. Should I be wrong or slightly misguided on these points, I always love constructive criticism, should someone down the comments line offer any.

If you were to forgo the LLC, do you have another plan in mind, or just to assume the investment under your name?

Thanks for the opportunity to learn with you,

Nathan

Jeff B. · Answer

@Nathan Shepard

I'll share what I've learned over time:

• Asset Protection & Piercing the Corporate Veil

To LLC or not to LLC?

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