Question: Real Estate Investing Partnership Structure

[Abid R.]

A few of us want to get together to invest in a few rental properties. What would be the best structure to form this partnership (LLC, REIT, etc.)? If some of you can shed some light on pros and con's it would be great. The primary area of investment would be Houston, Texas. Much appreciated Thank you!

[Zain Momin]

Abid,

I would say the easiest way to get started would be to create an LLC. Creating an LLC for your rentals is a smart choice as a property owner. It reduces your liability risk, effectively separates your assets, and has the tax benefit of pass-through taxation while separating personal money from rental money. However, most lenders will not let you close in an LLC which means you might need to have tittle on your name. You can transfer the title into an LLC later but that can trigger a due on sale clause. Also, I would talk with an accountant, as they can advise on your current financial situation better. 

Please let me know if you have any questions and feel free to reach out.