Real Estate Business Plan
Would you create more than one LLC for real estate investments?
I'm working on a business plan for a real estate investment company. I buy, hold, and manage rental properties. I'm thinking of creating a new LLC for each property but I'd like to manage them all under one central LLC. Do you think this is a good idea?
Greetings again Lacey, most of our investors do create an LLC for their investment property. Either after closing or before you should place the property in an LLC to separate yourself and your other assets from that liability.
Secondly the formation of an LLC makes it harder for the pesky tenants to track you down and annoy you, that is why you hire a property manager; like me!
There are two reasons to have more than one LLC.
Reason #1. Each LLC is a separate entity so if one is involved in litigation it should not endanger the others.
Reason #2. One of the most effective ways of limiting liability is for one LLC to own the assets and another to lease them from that LLC and operate the business from.
So, Lacey 1 LLC buys all the property. Lacey 2 LLC leases that property from Lacey 1 LLC and operates an rental property business.
The LLC that leases the property has no hard assets to take.
This gets pretty complicated at tax time, and also if you do something terribly egregious most judges and jury's will lump them all together anyway.
Better talk to an atty and a tax guy.
Most generally this is not the usual method, only people with extremely large assets tend to do this kind of deal. Several major corporations do things like this.
CBBain ~ Business Planning in Real Estate
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