Hello everyone. I’m a new investor that currently lives in Florida. Right now I’m looking at purchasing some cashflowing properties that are out of state. I’ve been reading and have come to the conclusion that I first need to setup a llc. Now my question is, do i need a llc for the out of town state and/or one for my state? For example. lets say i want to purchase a rental in indiana. Do I need to just setup a llc for indiana and can i do everything for that llc since the property is out of state. Or should i setup a florida llc also for some reason. I’m just seeing what i’m getting myself into.
You don’t need an LLC. If you buy properties as an individual you get better financing. You get an LLC to solve a problem that you have. For example if you have bought 4 or 5 houses and the banks balk at financing more houses, you refinance the houses into a blanket loan. You need an LLC to receive that loan. If you are buying a multi family apartment complex you need an LLC to receive the property but it needs to be a “fresh” LLC so you need to start it until you are ready to buy the property.
You say you came to the conclusion that you need an LLC. Think about it again and make sure you actually have a problem that an LLC will solve.
I thought the reason behind getting a llc is for personal liability protection and tax breaks vs just putting the properties in my name. Idk i’m new to this.
You should carry high amounts of liability insurance on your properties. LLCs provide pass through taxation. Having an LLC won’t get you special tax breaks. It will cost you extra to have your taxes figured each year as well as cost you in annual fees to maintain it.
I’m going to repeat a line I’ve read here ad nausium:
Invest where you live. You will do many things wrong initially. Why would you want to add distance into the mix? You live in Florida? Nothing for sale on the cheap right now? Have you looked? Good luck but don’t buy yourself a headache 1500 miles away.
alright thanks for the advice, ill look for something close by. What about putting a rental property in a land trust?
Just like justin0419, protect yourself with insurance, a few million in liability insurance is great protection, UNLESS you are an extremely wealthy person, if your worth a hundred million or so then you might want to consider an LLC, but you will pay more for financing
I only buy properties wiithin about 15 minutes of my house, and even then I still can go months without driving by a house,if the house was even an hour away, I can’t imagine I would know what was going on with it
stay close, also only invest in an area you know really well, you know what school district renters want, and even what schools within a school district people want (if the district is divided into different high schools, etc)
Your properties come with insurance which will cover most risk. Above that amount you are looking at worst case. Take out an umbrella policy for that. How much is the worst case you ask? First something bad has to happened and you have to be deemed liable. If you run your properties in a prudent manner you will probably not be found liable. Your insurance company will help you defend yourself because they don’t want to have to pay. If the worst thing happens which is the death of a child and you are deemed liable all parties will be satisfied with $1million. There are legal precedence that make a payment of over $1million to be very unusual. If they make you are made to pay more than that then you deserve to pay more because you did some bad stuff to these people.