First potential Deal- Need some advice

[Account Closed]

Hi everyone, 

I'm meeting with a very motivated seller today. We both agreed on the price on the property and we just need to sign the contract. This is my first deal so I feel a bit nervous and excited. I'm using a form from Steve Cook's course. 

Should I sign the contract under my name? or Should I use an LLC? Would this affect the way how my profits would be taxed? What should I do after signing the contract? Any general advice would be greatly appreciated.

Dan

[Jared K.]

I had an LLC in the past so I suggest when your getting started to just do it in your name. If you get to the point that your doing a ton of deals then yes get an LLC but for now it will only cut into your profits on taxes a little more by not having one. If you have a job then it will likely not show much difference on your return that you would normally get.

The reason I suggest this is b/c I have been there. You have to pay to start an LLC, which can be inexpensive if you do it yourself (mine was like $75) but costly if you pay a lawyer (about $300). Then if you have to pay a yearly tax on that LLC (mine $175), then if you ever decide to close that LLC it can be slightly costly as well. The reason it is costly to close one is because the LLC is filed with federal, state, and county so it cost to dissolve in all the offices, again...been there.

There are also two different ways to use an LLC for property:

1. The property becomes owned by the LLC and you sell that LLC when you sell the property. (could be a positive or a negative when you sell to your buyer)

2. The LLC buys the property and you keep the LLC to do business with but sell the property from your LLC to your buyer.

These are two big differences in the way the LLC operates/conducts business and would be taxed different as well so my advice to you is to consult with a good real estate attorney and a good real estate tax firm prior to making your decision.

Disclaimer: I am not a licensed attorney or licensed tax professional nor do I claim to be. The opinions stated herein is just that, my opinion, based on my own personal experiences in the state in which I live. Laws vary state to state so rely on your own due diligence, judgement, information and opinions from licensed professionals before you make any decisions regarding this matter. 

Sorry, had to throw that in there...lol.