I been research multi family unit and I am thinking of buying one for investment purposes (it would be my first property). I plan to occupy one of the units and then rent the other unit out. I was taking to a friend and he recommended I put the property under an LLC (meaning I have to create one and not even sure how to go about doing) to avoid any kind of lawsuits from tenants. Any thoughts on this, should I put the property in an LLC?
Am looking at 4units or less
Thanks so much for your answers
2007-02-18 16:18:32 · 6 answers · asked by kizito2001 1 in Business & Finance ➔ Renting & Real Estate
That is a great idea to start with 1-4 units. 1-4 units are considered as a single family home for mortgage purposes. It is also a good idea for you to move in one. This will give you a good interest rate.
My suggestion would not to place the first units you purchase into a LLC. There are complications when putting houses in LLC's and corporations. If and when you decide to refinance the property you have to take them out and put them back in your name. Most lenders will not refinance corporations or LLC's without a personal guarantees.
Now on your third 1-4 unit it would be worth it and advisable to put your property into a LLC or corporation, because it can show income, have a bank account with money in it.
Just remember a LLC or a corporation is a living breathing being and is not you, so don't treat it as an extension of you. Treat it as it is a different person. If you need additonal money from the LLC you will need to borrow it from the LLC after which you will need to pay it back. If you don't treat your LLC that way you can be in trouble with the IRS.
Check with an attorney or para-legal when forming your LLC or corporation which ever you decide to use.
I hope this has been of some use to you, good luck.
"FIGHT ON"
2007-02-18 17:27:01 · answer #1 · answered by Skip 6 · 0⤊ 0⤋
Yes you should. If you put the apartments in a LLC then you will be limiting your personal liability with the apartments. In todays sue happy world you never know whats going to happen. I own several quadraplexs (4 units) and a single family home.
My first one I purchased in my name and then quit claimed into my LLC. This way here I was able to buy it zero down and got a better rate. My next 2 were bought though the LLC and I have a higher rate and had to put 10% down to buy.
Talk to a real estate lawyer. They can get you set up with a LLC plus answer any legal questions you have. As a landlord you face an abundance of legal and civil responsibilities. Good Luck!
2007-02-18 18:34:53 · answer #2 · answered by realtorbalk 2 · 2⤊ 0⤋
You may want to consult with a real estate attorney before you decide. There are alot of pro's and cons involved with this.
For example, no you won't avoid lawsuits by tenants, but you won't personally be on the hook for damages ( unless it's caused by fraud). They can only sue the LLC.
On the other hand, I believe you MUST hire an attorney for EVERYTHING (because you're a company as opposed to an individual). This can amount to thousands of dollars in legal fees that you might otherwise save if you weren't a company.
There are others, so its best to seek legal assistance.
2007-02-18 17:30:58 · answer #3 · answered by Hoopfan 6 · 0⤊ 0⤋
I would recommend you take your friends advice and get your LLC. Not only will this provide you with a tax break and make it easier for your CPA to give certain deductions, but it can push liability away from you. For instance, if one day you have trouble with a tenant and they want to sue you, they will actually be suing your LLC. Your personal assets will be left alone. I would talk with a CPA to set this up, also some lawyers offer this service.
2007-02-18 17:42:11 · answer #4 · answered by Anonymous · 1⤊ 0⤋
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2016-09-29 07:40:17 · answer #5 · answered by ? 4 · 0⤊ 0⤋
Absolutely!! You answered your own question. If a tennant or anyone else sues you could loose it. Your real estate lawyer can set it up for you as part of his/her fee for the closing.
2007-02-18 16:24:50 · answer #6 · answered by opinionator 5 · 0⤊ 0⤋