Flipping with an LLC

[Garrett Rockholt]

Hello Bigger Pockets! My Name is Garrett Rockholt. I am an aspiring real eatate investor based out of Amarillo Texas. I have a question with regards to flipping within an LLC to get started. Here is where I am at. Ive been educating myself over the past few years on real estate investing. The end goal is to create passive income with buy and hold real estate. A close friend of mine approached me today and asked me to partner with him and start an LLC to invest together. After an in depth discussion, I agreed and decided it would be the best way to move foreward. We decided to make a plan with the first course of action being flipping a few houses to pay off a little debt and stack some cash for our buy and hold real estate in the future. So my question is this, what is the appropriate course of action for these goals? Can you buy and flip in an LLC or is that mainly for holding your assets? We will be using a hard money lender to finance the flips. The quick cash up front is needed to pay off some personal debt on both sides and build some money in the LLC to work with. We are green. No experience in the game whatsoever. I really appreciate any input and will use it to use foreward in most efficient way!

[Scott Smith]

Hey Garrett,

An LLC can be a great tool for flips, it's just important to establish a good operating agreement when establishing the LLC. If you do get into buy and holds you would want to use a separate LLC for those, as they are in a different asset class. The reason you split up assets by their class is that you are working to limit liability attached to your entity, and each of those strategies have their own intrinsic liabilities, some overlapping and some completely unique. As you scale you will want to look into introducing more protection, but to start with an LLC is a great option.

I would also recommend finding experienced professionals in your area. If you work hard and listen you can often build a network of real estate investors who can tie you into their deals, giving you experience and opportunity - your two greatest needs when you kick things off. Also building a good investing infrastructure as you are getting into things will benefit you if you intend on doing this long-term: find lenders, CPAs and attorneys who also invest in real estate to work with as they will be the ones who can help you set things up for smooth sailing and answer questions with the niche advice you want.

This isn't legal advice, simply my opinion as a real estate investor.