Setting Up a Business Entity Before Purchasing a Property?

[Nick Vollrath]

I'm new to real estate investing and looking for some advice on when it makes the most sense to set up a business entity. While I know I need to talk with a real estate attorney & CPA, does it make sense to set up an entity before I purchase a property? My intent is to set up an entity which will own the individual LLCs in which I'll purchase the properties. Before generating income through the rentals, I'd like the ability to deduct the expenses I'll incur in finding a property -- direct mail, mileage expense networking or visiting properties, etc. Thanks in advance to the BP community!

[Nicholas Aiola]

@Nick Vollrath you generally can't immediately deduct expenses related to acquiring a rental property, unless you already have a property in that general location. They basically just sit on your books until you acquire the property, at which point they'll be added to your basis and depreciated.

Forming an LLC won't change that and @Jeremy England is right - all too often, I see people form LLCs and pay the annual fees and what not for a year (or even longer) before actually acquiring a property.