LLC

[Roh Powanda]

Soon to be a single family home investor in Snohomish, WA area.
Need to know the pros and cons of having an LLC in WA.

How does one go about getting one.

[Chris Newman]

You can file a new LLC online at https://www.sos.wa.gov/corps/LimitedLiabilityCompa...

The normal cost is $180. But, unless you're willing to wait 25 days, best to pay the extra $20 and get it in 5.

One advantage of an LLC is that it separates your business liability from your personal wealth. All things considered, especially how sue-happy things are getting, that's probably a good idea. If something goes wrong with your rental, and they do, the most that you'll lose is the house.

Another advantage is, if you get into financial trouble and can't make the payments for some reason, the ding doesn't go onto your personal credit score. Then again, if you're going with normal mortgage financing, you may have trouble getting qualified with a new LLC that doesn't already have a good credit score.

LLC's are especially good if there is a group of investors working together, with the equity divided up via Memberships. All of your operating agreements are done within the LLC bylaws, which can be anything that you want and don't have to be public information. If one Member wants out, for instance, all they have to do is to surrender their Membership under agreed terms/price etc. (all written up and notarized) and there's no need to make changes in the public record of who owns the property etc. Likewise, if you want to take on a new partner, they'd buy a Membership, rather than changing the property's public record.

For that matter, if you later sell the property to another investor, if you sell them the LLC instead, and you both avoid the RE sales taxes, which are much higher for the seller than buyer.

This is not a complete list of pros and cons. But, there's ongoing paperwork so, it might not be bad to hook up with a Registered Agent who receives the paperwork and let's you know what needs to be done for a small yearly fee. More info and choices: https://www.google.com/search?q=llc+registered+age...

It certainly wouldn't hurt to speak with an attorney who knows this stuff to get a full rundown

In any event, before you make a decision, do your homework until you really understand this stuff and dig a lot deeper than online opinions. That's good advice for any business endeavor. 

That said, why Snohomish? It's one of the more expensive areas in the county and I haven't seen a lot of great values there. While the appreciation over the next few years looks good, starting with positive cashflow immediately might be a problem. 

But then, this is pretty much the case anywhere within an hour of downtown Seattle. That's why I short-term "treasure hunt" for hidden values on raw rural SnoCo land, instead of going long with residential. Far better profits with far less hassle, and, especially, no tenants.

Good luck!