Real Estate Investor (newbie)

[Connie McGinnis-Loftin]

BP network what type of real estate property would benefit from being in an LLC? the reason I'm asking is I hear some people say they purchased a property and put it in an LLC, I hear some people say do not put a property in an LLC if trying to refinance. When is it most appropriate to put a property in an LLC? and when isn't it?

Thanks,

Connie

[Benjamin Aaker]

Hi Connie,

The LLC has liability benefits. I'm not a lawyer but the LLC protects your personal finances and your other LLCs from that of the company. Should the company not be able to meet its financial obligations, you won't be personally liable. This would not apply if you get a loan with a personal guarantee. This also won't apply if you are grossly negligent in how you manage the property.

The downsides of LLC also turn off some people. There is a cost to start up an LLC and it is recommended you have a lawyer help form the company. There is a cost to maintain the LLC as well. The biggest drawback for starting investors is that you can't get FHA loans for an LLC, which means that your lowest down payment for an LLC will probably by 20% vs 3% with FHA.

That being said, I have all my properties in various LLCs and I recommend it for everyone except first time investors. Happy investing!