LLC or not for first renter property

[Jay Mersfelder]

Hello BP friends need some advice.. just purchased SFH to rent but have to do some improvements first..Little uncertain about do I need LLC or blanket insurance. Whats the pros and cons..plan on using BRRR method will I be able to get Heloc loan on property after repairs with LLC. Just trying to figure with only one rental property and soon to be two after I move out of my primary residence. GOING to do FHA loan and don't want to make a move that might be bad too my goals. Any insight would be helpful.

[David M.]

@Jay Mersfelder

https://www.biggerpockets.com/...

https://www.biggerpockets.com/...

Read up on the LLC topic in the above two threads.

Even if you have a LLC, you still need insurance otherwise you'll go broke defending your LLC. Let the insurance company handle it. Furthermore, its insurance...

If Title is held by a legal entity such as a LLC, it is no longer eligible for conforming residential loans, e.g. FHA, convetional loan, etc. You have to go with commercial financing which has higher interest rates and usually worse terms.

If you are going to use a LLC, you need to maintain and protect your corporate veil. Otherwise, the limited liability protection you were going after won't be there. Unless you are investing with a non-spousal partner, the LLC provides no additional tax benefits.

When you are starting out, you really don't need it. Yes, others on BP will tell you that they have LLC's, and even one LLC for one rental. Its up to you and your comfort level. As one accountant put it on BP, you can have 100 rentals in your personal name, 100 rentals in one LLC, or 100 rentals and 100 LLC's. Just realize the cost and effort involved.

Good luck.