Rookie investor - tax and legal advise

[Martin W.]

Hi investors,

I'm a rookie investor out of California who currently owns two out-of-state single family turnkey rental properties in Indiana. I'm hoping to expand my portfolio this year by one or two more properties. Both my properties are registered on my personal name and I have an umbrella insurance.

Since I'm planning to expand my portfolio, I'm looking for some tax and legal advise (for my 2021 taxes and to evaluate if I should move my properties into LLCs). However, when I look on legal/CPA websites, the pricing would wipe out my cashflow/gains.

What should a rookie investor like me do? Wait until I have enough properties for it to make sense, or are there more affordable ways to get legal and tax help? Any recommendation would be more than welcome!

Thanks,
Martin

[Michael Plaks]

@Martin W.

LLCs are discussed on this forum weekly. Just search the forum, and you will find dozens of threads dedicated to LLCs, insurance, asset protection and all these issues. What you will NOT find is a consensus. Some investors and even some lawyers will advise you against LLCs, some will suggest they're absolutely necessary, and anything in between. It's like trying to get advice on dieting, relationships or Covid. Everybody is an expert these days.

Likewise for general tax strategies. The key word is "general", because quality tax planning is case-by-case and, as you discovered, is expensive. Just like with any other professional service, you can find cheap options, and usually (not always, of course) you get what you pay for.

I also suggest that you reconsider your perspective on buying professional services. You're saying that they "will wipe out your savings." Quite possibly so. This is not the point however. When you're in business, you're buying a lot of things that do not directly translate into savings. Examples: insurance, education, maintenance & repairs, technology etc. They are simply a necessity when running a business. Tax and legal services are of the same variety. And just like with insurance, one day they may save you from a major problem, and you will be glad you invested into it.