I am new here and have been studying real estate investing for a while now, I have been in the mortgage business for 10 years and am ready for something different…I have a few questions that I cannot seem to get a clear answer on…First, say I buy a house, fix it up, sell it for profit, what would be the best way to hold title, in my name or DBA, LLC?? Second, if I am financing these properties, they obviously will be on my credit, therefore, in my experience with lenders, they question all these properties on my credit? I did not work with hard money lenders though, so I am not sure how they work? I was told that the only way to get around all of this was to pay cash!!! Yes that would be nice if I had it. ??? ???
Any input would be greatly appreciated…
Here is just a small piece of information in the big picture: insurance will be triple if you hold in an LLC as opposed to personally. For this reason some investors like to hold personally and get an umbrella policy for additional liability coverage. I think most will tell you to start without the LLC then move to LLC when you reach a certain number of properties or income level.
insurance is great, but that million dollar umbrella policy isn’t going to touch the judgement mama is going to get when little johnny jumps off your scrap lumber pile and breaks his neck. Holding property in an LLC protects your personal assets from the risks involved in property ownership.
Insurance for my LLCs is cheaper than my homeowners.
whether you hold title in a LLC or personally, your profit will be taxed the same since for most people, the LLC is a tax disregarded entity. Yes, you can elect to be taxed as a corporation, but for most people this is not the way to go.
I love the llc or no llc debate. It is a matter of personal preference. There is no right or wrong. Just tolerance for risk and loss.
There will be as many different opinions as there are people.
So, my opinion. If you have assets worth protecting, an llc might be best.
If you are heavily mortgaged and have limited personal assets, the risk might be worth it.
If papa left you 10 unencumbered properties, you may consider several llcs.
I buy no money down have limited assets so I go the personal route with additional liability.
Mark, how many times you been sued for over a million…and lost? Or how many times sued at all.
Well - I think an umbrella will in fact cover an accident. And if you have an LLC or hold personally, you should not have scrap lumber piles on rental properties
Me? sued once. settled (no assets).
clients? Got one now that elected to NOT place his properties in LLCs. Got sued. Lost. Had to sell 3 houses to settle the mess. Meanwhile, has a judgement on his credit, couldn’t buy or sell anything while it was all pending for TWO YEARS.
If his properties had been siloed in individual entities he 1) might have been able to continue business in the other entities while this property was “tied up”. 2) would probably have avoided a judgement on his name 3) may have avoided the ambulance-chaser completely since he would have shown no assets in his name for the blood-sucker to locate. and having only the one property (he owned all of them debt-free) may have been not enough for the atty to pursue. maybe maybe maybe. but with NOTHING, his fate was sealed.
my point? It only takes one.
With all respect, I’ve never been thrown through a windshield, either, but I’ll continue to wear a seat-belt.
I would be curious to know if the situation described if the individual had any liability insurance in place and if so, did it make a pay-out against the judgement.
As we know, insurance companies will tell you how great their products are…until you make a claim and then they act like heard of you before…
I like the seatbelt example…never thought it that way. I’ve been in two fairly high speed accidents (neither one my fault) where I walked away without scratch from a totaled auto (wearing a seatbelt…) .