Debating to Create LLC or Rent Out the Property First

[Jona Leu]

Hello BP,

I am new to the real estate investing and would like to create some fortune by rental out my property as side income. Currently I am living in a condo which I've already paid mortgage for around 1 ½ year. I am preparing to move out in next couple months and would like to rent it out, however, in order to invest more rental properties in the future, I am deciding if I want to create a LLC before I start to rent out the property. I am in Michigan, as I know the registration fee for LLC is $50 and $25 each year to keep it good standing (please correct me if I am wrong). And I have some options:

1.Create a LLC, and transfer the property under LLC and then rent out. Issue I would face:

• Should I transfer my mortgage to LLC too? If so, how can I pay the monthly mortgage with LLC since the beginning balance will be zero? Or I can deposit my personal money as emergency fund/capital just in case the condo will be idle for couple months?
• When is the best time to look for an accountant? Can accountant help me to create LLC or I can personally apply online and seek for advice for operating LLC?
• I used to file the tax return by TurboTax, from my understanding that LLC can be able to file with personal tax return, do I really need an accountant?
• Would you suggest me to do the LLC bookkeeping my own? What kind of software you would suggest? I have a bachelor degree in accounting so hope the knowledge can help me save some money. I am not CPA since I changed my career to other field lol.

2.Rent out the property, and then create and transfer the property title under LLC.

• Will it be more complicated than option 1 for the transfer process (paperwork, cost, time, risk…etc.)? Vice versa?

3.No need to create LLC, buy umbrella policy up to 1 million.

• Would 1 million policy sufficient for only one condo?

Any suggestions would be greatly appreciated! I will keep research the real estate investing in BP and hope to learn more knowledge and be able to invest the second property soon! :)

[Andrew Halbert]

@Jona Leu

How else are you going to ever be able to vet a property management company until you know first hand what it takes to actually manage a property successfully? Not only are you giving up cashflow on your first deal, but you are giving up the experience of really being a landlord. I say wait until you have more properties and feel comfortable handing over the keys to a PM.  I will not use a PM until I feel like I really know and understand what it costs to fix things, how to interact with tenants from all walks of life. etc...

Just wait till you have your first showings.. LOL the people you will see come into your house will blow your mind.  You NEED to experience it all.