Rented Out My First House--Now What?

[Andrew White]

Hi Folks,

I'm new to the BP community and real estate investing in general. It's good to be here! In the last couple months, my wife and I were successful in renting out our first house (our former primary residence of 3 years) in the foothills southwest of Denver, CO. We bought our second house (new primary residence) in the Twin Cities area to accommodate some life changes. I have some questions about how best to have this long distance rental property. We have a good property manager who got some great (so far) tenants in on Dec. 1, and we got our first "check" last Friday. (Super Exciting Stuff!!!) We also set up an umbrella insurance policy to protect ourselves. Any and all thoughts and suggestions are welcome!

First, I'm wondering if we should transfer the house to an LLC? I've generally read that this is a smart way to provide yourself an extra layer of protection, but our property manager thought it would be bad for tax reasons (which I don't get, I thought LLC's were pass through entities). If we should do the LLC, does it make sense to incorporate in Colorado (where the house is) or Minnesota (where we are)?

Second, I'm thinking we likely need to get serious and get a CPA. They supposed to pay for themselves and TurboTax just ain't cuttin' it anymore, right? Do you see more value in having a CPA in Colorado (where the house is and last year's taxes were filed), or Minnesota (where we now live and will file in future years)?

Lastly, should we be asking these questions of a real estate attorney, or is that overkill? We're likely only going to have the one rental property for the next few years. If so, same question on location applies. Best to have one that knows the local laws, or is near you?