I’m a beginner looking for my first deal and am trying to get some advice on what type of entity to use. I’ve heard a couple investors say to never buy a property under your own name unless you plan on immediately flipping it into something else, usually a Trust.
For buying single-family homes or small apartment buildings to hold, what do you recommend? Trust? LLC? Most people don’t recommend partnerships it seems.
I imagine fees vary, but what is the typical cost of forming one of these entities?
For those that are just beginning, how difficult is it to purchase in the name of an LLC, S-Corp or C-Corp? Or do you just purchase in your name and then immediately transfer to the entity? Seems to me that if you purchase in your name then put into an entity you have a trail for the lawyers to follow.
Of course, if they do follow it, the will realize that you own LOTS of debt on property you don’t own I suppose? I realize that if you are paying cash, this really isn’t a problem. However when dealing with banks, they tend to not want to loan to a corporation, especially new ones. Also, the rules begin to change when you are lending to a corporation. Lots of disclosures go out the window, rates change…
Most attorney’s won’t bother much if you have just one property (although they could), so I wouldn’t worry a whole lot about setting up an entity until you’ve done a couple of deals. Of course, if you already have a substantial amount of assets, you should probably consider forming an entity early.