The real estate investment market of today offers opportunities to anyone willing to forge their own personal wealth. We’ll introduce you to the concept of employing a limited liability company structure (LLC), which keeps your business and personal finances separate when you buy investment property. While not suitable for everyone building their investment portfolio, you will want to take the time to consider the following pros and cons of using an LLC to buy investment property in . When an LLC is structured properly and has been carefully designed uniquely for your long-term investments, it can help you reach your short and long term income stream goals. While not impossible for the public to locate the actual owners of an LLC owned property, there is a certain degree of anonymity.
Cons of Using an LLC
While liability is limited, it does not mean that there is absolutely zero liability to you personally when using an LLC to buy investment property in . Just remember there are limits. Be certain you understand the legalities completely and ask questions about anything that isn’t clear to you.
It’s important to weigh the costs of the benefits against the expenses of using an LLC to buy investment property in . Insurance rates are higher for LLC properties. Additionally, there are fees associated with the initial structuring of the company, as well as annual expenses to consider. Likewise, you must form an LLC for each property.
Due to the inherent protections of your personal assets under an LLC, it can be difficult to get conventional financing to buy an investment property in . There are other sources for financing who are willing to risk working with investors, some of which specialize in LLC financing, but this does come at a price as well as a result of the risk they are assuming. If you decide to include partners, be aware none of you can buy, sell, or trade your equity in the company.
Pros of Using an LLC
No matter if you are just beginning to invest or you’re an investor holding a great number of assets, you can be sure that should the worst happen, the fees involved to create an LLC are a small price to pay. When you employ an LLC to buy investment property in , your personal assets are protected should a lawsuit be brought against the property holder by a tenant or other entity. Because your insurance policy on your property has limits, remember that without an LLC structured company, your personal assets are still at risk.
Should your preference be investing with partners instead of singly, you can do either by using an LLC to buy an investment property in . There is power in numbers, and you can take advantage of this through an LLC as an investor, depending on the number of partners you’re planning to work with.
Income realized through an LLC, which is structured as a pass-through entity, passes the income from the entity or corporation, to an individual who is then taxed at the individual rate only. This business structure is essentially preventing double taxation by eliminating taxes on corporate-level income for the same individual. This advantage is why many opt to structure their investment property business in through this method.
Ready to get started building your real estate empire? We are happy to discuss more pros and cons of utilizing the LLC structure to meet your individual needs when you buy investment property in . Big or small, Discreet Homebuyers can help you structure it all! Send us a message or give us a call at (248) 470-8170 today!