To LLC or not to LLC is the question?

[Kerberos]

Hi!  I’m in the process of buying a MFH and I’ll be occupying one of the unit and rent the remaining out to tenants.  What so I do?

1. Form a LLC for the entire property
2. Form a LLC for just the unit I’m renting (is this even possible?)
3. Form a Trust for the entire property
4. Don't do anything...leave eveything in personal asset

If the answer is to form a LLC, when should I do this, before or after the purchasing of the property?  Or does it matter?  I’d love to hear the member’s suggestion on this as I’m starting to look at properties this past weekend at Salem, MA.  And for those members, who are familiar with the area and know of good deals for a MFH for sale, I’d love to hear from you and I’m willing to pay for your referral fees (a reasonable amount).  I’m looking to move in sometime in the next couple of months if things workout.

Pardon me if this quetion has been asked before.  I'm new to the site and I've looked though the threads and could not find ones that's unique to my situation.  Thanks again for all your help on this.

Cheers!

[Kerberos]

Oops...I just read the rule for this forum and it said no referrals...please disregard my mentioning of referrals on my last thread.

Thanks again!
 

[Dave T]

This recent thread seems relevant to your situation:  

LLC FOR THE FIRST HOUSE OR THE SECOND?[/list]

[Kerberos]

Thanks DaveT!  I'll take the advice and possible check in with a CPA to get the process going.

Thanks again for all the good information on all the postings.  I hope one day I'll be able to contribute to the pool once I'm up to speed on REI.  In the meantime, I've learn a lot from you veterans REI and newbie’s alike.

Cheers!
 

[mcwagner]

1.  yes
2.  don't think this is possible.  
3.  yes
4.  NO

[Kerberos]

Thanks you mcwagner!  I'm very excited about this purchase and wanted to make sure I get all the facts and detail iron out before getting my feet wet.

I'm amazed how there are so many helpful REIs in this forum.  Just goes to tell you that this is the right place to be for Real Estate Investment.

Thanks again!
 

[TMCG]

questions:

do you know what a Limited Liability Company is?

what would be the mission of the LLC?

How will the LLC generate revenue?

who will run LLC?

[Kerberos]

These are good questions TMCG.  Are these questions directed to me?  If so, I have an interesting story to tell……I’m actually new to REI and I’ve been doing some research on the NET and have attended the Real Estate Expo Seminar in Boston last month but other then that, most of my knowledge came from reading threads from this forum.  

What got me started in REI is that my little sister is moving to Salem Ma to study for her college and I don’t want her to be like me, flat broke, after college and takes years to save up before she can afford a piece of the American Dream.  So, I figure I just take this opportunity to help her out (I already have a SFH) and help myself by getting into the Real Estate business by buying MFH so I can learn the rope of being a landlord, setting up LLC to protect myself etc and eventually buy more MFH so I can generate more incomes.

And to answer your question:

do you know what a Limited Liability Company is? Very little, most from reading this post and what’s available on the internet.

what would be the mission of the LLC?  I guess this is to protect personal asset in the event if I get sued by my tenants…

How will the LLC generate revenue?  Income from renting, since only one out of the three unit will be occupying by my sis.

who will run LLC?  My sister and I, since we’re both the owners of this home.


Before I close on the MFH, I’ll mostly like find a local CPA/LLC, someone like Mark Wagner, to help me setup the LLC/Trust and answers any details questions I may have.  This is my first time doing this and I definitely need to seek professional/expert advice on this.  

Sorry for being so long winded.....

Cheers!
 

[Melissa]

Can a CPA set up Trusts and LLCs?  If so, I'd definitely feel comfortable with mcwagner as a professional who knows the ins and outs of what we are trying to do.

[TMCG]

Kerboeros - sounds exciting!!!

i'm a big proponent of people knowing more about things then just the "buzz" words of real estate, like "asset protection".

an LLC is a company.  it is a business.  that business affords it's members/owners certain liability protections.  at the heart of what an LLC is, is a separation between you and your business.

setting up an LLC will help you to manage your business, at least that's what it should do ONLY IF YOU TREAT IT LIKE A BUSINESS.

even with "an LLC", you can still be sued by just about anyone.   so setting one up doesn't mean squat, unless it's managed like a business.

now if the LLC is only going to generate revenues from tenants paying their rents - what is the plan in place to increase other revenue possibilities?  
this is where you have to give your company a direction.  

how will you expand?  
what other options do you have available?
what back up plans do you have in place?
what other types of agreements can the LLC become involved in that will generate more and more revenue?
who will manage the company?
what is their experience?

on and on.  i'm not trying to complicate things either.  just think things through.

like for instance..you said that the rent will be the income.  okay...what other simple ways can you increase rents?  can you increase them?  what other ways can you increase overall revenues?

i can think of a couple.  think.

as far as using a CPA to set you up.  that's the easiest way.  however, don't just set it up and leave your corporate book laying under your bed.  again, it's a business.   LEARN ALL YOU CAN ABOUT LLC, taxations and management, as well as some general laws governing the entity.

learn if indeed, it is the best business entity for you.  

you can do it, but you must do it, or else you'll be schlubbing around like so many other people out there.

[mcwagner]

Melissa, I can set up entities, but I cannot set up trusts.

some silly rules about practicing law without a license.

[REjunkie]

I just started an llc. for 2 reasons, 1 for buying power and the other for asset protection. I was told by a mortgage broker that after having a business for 2 years, even if you do nothing with it, that you can do a no documentation loan with that.  I went on line a filed for an llc for $25.00. Now I need to find an accountant familiar with realestate law to help me get my rental property under that llc.