Setting up an LLC for rental properties

[Tiffani T.]

I am fairly new with REI and could use some suggestions and/or advice from those who have had exposure to setting an LLC for your rental properties. I am undergoing the process of purchasing my 3rd home and the thought of setting up an LLC came to mind. An agent also recommended that I must have one. How do I set this up? Or should I even attempt since I will only have 2 rental properties, not 10 (not yet). I understand at some point I will need to widen this discussion with a CPA for tax implications and etc.

 And how?  

Tiffani

[Mike S.]

There are different school of thoughts on the matter. On my side, I am a believer in the one LLC per property concept. If your State has high fee for LLC you may want to reconsider, but in my State, it costs me under $200 a year per LLC and I take that as a cheap additional insurance cost.

As these LLC are tax disregarded, it does not increase my tax burden, but creates a little bit more paperwork as you will probably need one bank account per LLC to avoid losing some protection.

I have on top of it a WY holding LLC that is the single member of all the sub LLC. This one creates some additional tax reporting but that you could probably handle yourself after getting some tax advice the first year.

There are plenty of very good online video on the subject by some of the few real estate/tax oriented attorney firms.

I understand the pro and con of each side and at the end of the day it's a matter of personal choice and what will make you sleep easier at night.