LLC questions for new investors

[Ashby Tyler Cappelmann]

Hello everyone! My wife and I are currently in the underwriting phase of a 203k loan for our first rental property which will be a duplex in the Cape May, NJ area (08204). I was wondering if anyone has any insight on whether or not we really need to form an LLC at this point and if so, does anyone have a referral? Is this something that should be done on your own or is it worth the money to pay an attorney? As I said this will be our 1st property and we're going to be house hacking. We are military and scheduled to leave the area in 2020 at which point we will be investing in the northwest South Carolina market from there out. This very well could be our only south jersey property. Having said that, can you transfer a property from a NJ LLC to a SC LLC? Any insight on this that fellow investors can provide will Ben greatly appreciated. Thank you.

[Troy Gandee]

If you plan to live there, then there's no reason to do it yet. If you're going to keep the FHA financing for 15-30 years, then you won't be able to change the title to an LLC without potentially triggering the due on sale clause. If you keep it in your names, then just make sure you have good premise liability coverage in your insurance. FHA is usually pretty accommodating about turning a property into a rental if you have a substantial enough "life change" that causes you to need to move. Those 203k loans are slightly more complicated than most, so read through your mortgage to see if there are any deed restrictions or prohibitions from converting it into a rental. Though, I doubt there is.

I do not know the answer to transferring the asset to another SC based, LLC, but I'm sure you could do that. Definitely talk to an attorney or CPA when you get to that point. You'll still have to comply with NJ laws, but SC business taxes would be much easier if you had all of your entities registered here.

I also don't know about NJ, but setting up an LLC is SC is very easy. You can do it on your own, but I wouldn't recommend it if you've never incorporated a business before. You can also use a service like LegalZoom or something similar. An attorney can do it quickly for a reasonable amount of money, as well.