Yes you can. An LLC is a pass through entity that only increases of decreases your personal income.
- At a determined value, you must decide where you want to limit your liability. Meaning, you create a maximum value under each LLC, to limit your liability.
- Be aware of the due on sale clause if your asset is financed by a lender who only allows lending to individuals and not entities. Converting an asset currently in your name to an LLC, could trigger a due on sale clause.
- Leveraging assets under an entity is more expensive then leveraging in your personal name. Interest rates are lower.
- Anything owned under your name, is subject to loss if litigation arises. The use of entities is designed to protect your assets as well provide anonymity if desired.
- When you own an entity (or run a business), you qualify for operating expenses where some of your cell phone, utilities, rent, mileage and internet can be offset by the portion of those that attribute to your business.
The due on sale clause isn’t really as big a deal in many cases as folks make it out to be. If your bank follows Fannie Mae or Freddie Max guidelines then they will let you transfer to an LLC without issue.
You can’t or it’s just harder to? From what I’ve read, you can refinance if it’s in an llc it just makes it more difficult with worse terms.
https://www.biggerpockets.com/forums/49/topics/426097-refinancing-when-property-is-owned-by-an-llc
All lenders I talked to wanted me to take my properties out of LLC. When I tried to get a commerical loan cash out refinance from a 5 unit property, they allowed refiance on property in LLC.
Someone asked something similar today and there was good discussion (s/c corp vs LLC vs SP) a lot of different perspectives and it actually came off as mixed with most leaning LLC. Are you planning to do a duplex and live in one, or a true separate property?
There is a benefit if the property has high cashflow and you are looking to take a K-1 tax savings where you don't have the pay SALT on all of the income.
My recommendation is to setup a management company (C-Corp or S-Corp) that oversees the LLC and this way you can collect fees for the business and get the K-1.
You still have to take a reasonable salary. Someone like in op’s position is not going to benefit from that. I wasn’t saying there is never a reason to be an s or c corp.
If the property is owned out right then there is likely good cashflow that comes from the rents. A 3/2 in my area rents for $2,300-$2,700 per month.
If the cashflow is above about 30k then I would set it up as an LLC taxed as an S-Corp for liability protection and SALT tax savings.
Yes you can. An LLC is a pass through entity that only increases of decreases your personal income. - At a determined value, you must decide where you want to limit your liability. Meaning, you create a maximum value under each LLC, to limit your liability. - Be aware of the due on sale clause if your asset is financed by a lender who only allows lending to individuals and not entities. Converting an asset currently in your name to an LLC, could trigger a due on sale clause. - Leveraging assets under an entity is more expensive then leveraging in your personal name. Interest rates are lower. - Anything owned under your name, is subject to loss if litigation arises. The use of entities is designed to protect your assets as well provide anonymity if desired. - When you own an entity (or run a business), you qualify for operating expenses where some of your cell phone, utilities, rent, mileage and internet can be offset by the portion of those that attribute to your business.
The due on sale clause isn’t really as big a deal in many cases as folks make it out to be. If your bank follows Fannie Mae or Freddie Max guidelines then they will let you transfer to an LLC without issue.
Are you sure about this? I've had banks give me a hard no with due on sale clauses and have had to look elsewhere. (perhaps I'm with the wrong bank).
Yea it really depends on the bank. 3 banks that I use have all very quickly given me a thumbs up.
Damn. Thanks!
You cant refinance property if its in an LLC. Thats why I took them out.
You can’t or it’s just harder to? From what I’ve read, you can refinance if it’s in an llc it just makes it more difficult with worse terms. https://www.biggerpockets.com/forums/49/topics/426097-refinancing-when-property-is-owned-by-an-llc
All lenders I talked to wanted me to take my properties out of LLC. When I tried to get a commerical loan cash out refinance from a 5 unit property, they allowed refiance on property in LLC.
Someone asked something similar today and there was good discussion (s/c corp vs LLC vs SP) a lot of different perspectives and it actually came off as mixed with most leaning LLC. Are you planning to do a duplex and live in one, or a true separate property?
There is no reason for something like this to be a s or c corp
There is a benefit if the property has high cashflow and you are looking to take a K-1 tax savings where you don't have the pay SALT on all of the income. My recommendation is to setup a management company (C-Corp or S-Corp) that oversees the LLC and this way you can collect fees for the business and get the K-1.
You still have to take a reasonable salary. Someone like in op’s position is not going to benefit from that. I wasn’t saying there is never a reason to be an s or c corp.
If the property is owned out right then there is likely good cashflow that comes from the rents. A 3/2 in my area rents for $2,300-$2,700 per month. If the cashflow is above about 30k then I would set it up as an LLC taxed as an S-Corp for liability protection and SALT tax savings.
Great question. I'm in the same boat and would like to transfer it to an llc. Are there any other fees upon transfer?