LLC creation - Do it on my own or have a lawyer involved?

[Ronit Gieske]

Hi Everyone

New to the real estate investment game. We have recently purchased two investment properties in MKE and would like to form LLCs for each and transfer title. The process seems relatively straightforward on the Wisconsin state website for LLC creation - I believe transferring title would be best handled by a lawyer. Would you recommend we use a lawyer for both LLC formation and for transferring title? Thanks in advance!

[Marcus Auerbach]

Quote from @Ronit Gieske:

Hi Everyone

New to the real estate investment game. We have recently purchased two investment properties in MKE and would like to form LLCs for each and transfer title. The process seems relatively straightforward on the Wisconsin state website for LLC creation - I believe transferring title would be best handled by a lawyer. Would you recommend we use a lawyer for both LLC formation and for transferring title? Thanks in advance!

If you really want to transfer title, any title company can do a quit claim deed, typically costs much less than an attorney. The bigger question is should you really do it and that depends amongst other things on the size of your two purchases.

LLC's are often a bit misunderstood, or should I say the effect overestimated? It is certainly not the catch all legal protection people often think it is. Done correctly it is basically a legal fire wall between your businesses and keeps the fire to spread from one to the other.

Google the topic before you go ahead; Brandon Turner has a great short video on YouTube about the pros and cons. In order for an LLC to really work, you need to treat it as it's own business, meaning bank account, tax return etc. If you have financing on the property, you probably have a due one sale clause, which mean technically you have to repay the loan the minute you transfer the collateral into an LLC. Banks don't catch it and that's what people bank on..

Bottom line: if you have bought 2 appartment buildings for a couple million each, LLC make sense, your lender will even require you to take title in an LLC. If you bought two single family homes, you may find that the cons outweigh the pros.

Your most important legal defense are good forms and leases; Wisconsin Legal Blanks is propably your best reressource. They have a physical store in Milwaukee with all sorts of landlord supplies, but you can also order the forms online. We much prefer the letter size over legal size, I wish someone told me that when I started..

Insurance is also very important; your property insurance has legal coverage, but I would recommend an umbrella policy, that covers up to $1 million - that is realatvley inexpensive and there are not many issues that could in theory exceed this much in damages. 

And check out the Rental Property Association RPAWI.ORG, consider signing up for the landlord legal bootcamp - the next one is Nov 4th.