Do you incorporate before buying a rental property?

[Suresh Kumar]

Hi, I am planning to research and buy rental properties / flip houses. Is it wise to form an LLC or do in personal account. How are others doing this? Any suggestion to a newbie?

[Ali Boone]

Rental properties and flipping houses are two very different things in the context of the question you are asking. The main difference being passive vs. active income, in the eyes of the IRS, and that distinction matters for LLC/entity structuring. So from that standpoint, you want to know exactly what you are doing REI-wise before you try to structure anything, if you decide to do that.

My answer from a completely different standpoint is-- no, creating LLCs before you've really gotten started is really putting the cart before the horse. In my opinion.