Owner Occupied Duplex - LLC for Property Management?

[Corey Chambers]

Hello all,

I've been a longtime student of BiggerPockets and recently made the jump into my first purchase. My girlfriend and I recently bought a duplex and will be occupying one side and renting out the other. The property is held in our personal names as tenants in common (50/50) using an FHA loan. I am wondering if it would be advantageous to create an LLC to run the income and expenses through with each of us owning 50% of the LLC. This would make keeping track of the income and expenses easier (in my opinion), however how would this be reported on our tax returns? I'm assuming the property would still be reported under Schedule E, but would any of the income/expenses be reported under Schedule C? Or would everything go under Schedule E?

Our future plan is to move out in 2-3 years and move on to the next property upon which we would create a separate RE holding LLC at that time for that specific property. The original LLC could then be used as a parent holding entity and/or property management entity for any future acquisitions.

Thanks for reading! Appreciate any advice

[Drew Sygit]

You stated you & your girlfiend bought it together, so some questions:

1) What happens if one of you is suddenly incapacitated or dies? Does the survivor get the other 50% or do they have to deal with relatives that may be greedy?

2) What happens if you break up and one wants their investment out now?

3) What happens if one of you drinks & drives, killing someone and getting sued by the victim's famly? How would the other partner be protected from that?

So, why wouldn't you want to hire an attorney to create a partnership agreement and perhaps an LLC to cover as much of the above as posible?