Comments on: The Best Investment Property Holding Entity is the LLC

By: Scott Ficek

Scott Ficek — Thu, 02 Feb 2012 03:25:21 +0000

I am not an accountant, but correct. If you don’t do anything, most accountants will file as a C corp. You can save some self-employment tax if you change and file as an S corp (which I did).

By: Scotty1

Scotty1 — Thu, 02 Feb 2012 01:23:12 +0000

Thank you for the discussion, but I have a lingering question. The Feds don’t recognize the LLC as a tax entity. The LLC is simply a State tool. Once you’ve set up the LLC, what entity do you want for federal taxes – S-Corp or the default Partnership? Thank you for the input.

By: Scott Ficek

Scott Ficek — Sat, 24 Dec 2011 02:42:44 +0000

I’m not an attorney. You should get advice from an attorney or credit counselor.

Here is my thoughts: What are you trying to protect? Only in bankruptcy can a creditor ask for a property to be liquidated to pay off debts. Also, if the home has a mortgage on it, that bank would get paid off first. In this market, I assume there is no equity in the property if you have a mortgage. Plus, if you are not taking income, what could they go after?

By: janetelayne

janetelayne — Sat, 24 Dec 2011 02:27:47 +0000

I have $25,000 worth of credit card debt that I am in the process of settling. To protect my investment property I was advised to set up a LLC with this property’s address, which I have done. However, as this property is occupied by family there is no income from it so I will have none to claim on my taxes for the LLC. Also the LLC is listed as a theatrical one with me as the only member and performer. I was also advised to open a LLC bank account to deposit my income from my job and from my security benefits to protect it from my creditors while I resolve the debt. After reading your post, I am considering the quitclaim deed if my lender will allow it. Is there anything else I should do to protect this home? And will not having an income to report for the LLC be a problem for me should I be sued?

By: Minnesota House Rental

Minnesota House Rental — Wed, 14 Sep 2011 02:21:22 +0000

I think the one thing that rings true in all this discussion is to use the LLC but also to carry a good property insurance policy on each investment property, and add to that an umbrella policy. Then I also require each tenant to purchase renters insurance with $300k of liability insurance so HOPEFULLY you can burn through all those layers before needing the protection of the LLC.

By: Investment Property in Tunisia

Investment Property in Tunisia — Fri, 20 Feb 2009 16:50:54 +0000

Hi Scott, thanks for this post, it’s certainly food for thought. We’ve always worked on the premise of more than one property per LLC, however John from Cali raises an interested different angle of having one per propery.

By: John From Cali

John From Cali — Sun, 13 Apr 2008 20:22:16 +0000

Scott,

I appreciate your economical insight into “How Many Properties per LLC ?”

The common response is to set up an LLC for each property. This is usually based on advice from individuals who are charging you to set the entities up for you.

I also got some insight into how much it cost to have my CPA file a tax return for each entity. When you add it all up, I agree their needs to be a balance of costs vs. protection and 3-5 properties per LLC sounds like a good starting point.

By: Johnbeck Seminar

Johnbeck Seminar — Fri, 28 Mar 2008 06:41:09 +0000

Now who are these sources and why are they using “housing” and “real estate” interchangeably when addressing the bubble?

By: Jeff Brown

Jeff Brown — Mon, 03 Mar 2008 07:35:42 +0000

Though there are plenty of supporting IRS ‘letters’ — there is a problem that pops up from time to time. My attorney says not to worry, as the problem has more or less disappeared in the last several years. Still, it crops up now and again. Here’s the deal.

You close the front part of your exchange, selling a property owned by one of your LLCs. You ID an upleg. However, the lender requires you to relinquish the property to yourself (as Scott indicates), because they won’t lend to your LLC and won’t allow it to take title to your upleg.

In many cases that’s a taxable event and goodbye tax deferred exchange. This nearly happened to a referral, sent to me a couple years ago, AFTER they’d closed the escrow on the front end of an exchange. They owned the property in a formal general partnership. We solved it, but it took a few grand to do it.

Bottom line? The IRS is pretty much looking at the spirit more than the function now — but beware. Scott’s warning to see your attorney wasn’t just for show — he knows what he’s talking about.

Great stuff, Scott.

By: Investment Property

Investment Property — Tue, 12 Feb 2008 17:41:04 +0000

No problem. All great additions to the topic!