I have a single-family home that I plan to rent. Can I start a LLC rental business based on this ? What are the advantages and disadvantages of doing so ? Can you give me some pointers to website dealing with this information.
Thanks
Ramna
Rent Back
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Yes you can. However, an LLC will not have much value unless you can transfer ownership of the house to the LLC. This will be very difficult if you have a loan on your home.
The purpose of an LLC is to insulate your personal assets from lawsuits. If you are worried about lawsuits, buy an umbrella policy from your insurance company.
Check your lease.
Unless you set up your lease with this in mind, it’s probably not going to be worth it.
The successful one’s I’ve seen do this:
1. Rent a house, low down payment, low monthly payment, long & renewable length with an option to purchase at a set, low amount. With a clause that allows for subletting.
2. Find someone to rent to with a significant down payment, higher monthly payment and an option to purchase at a fee higher than yours.
Then if you can keep it rented, you make money upfront, each month and at the final sale.
But make sure you earn enough to cover the risk of vacancy or default.
Talk to a lawyer to find out if you can evict your tennant out of a home you don’t actually own yet.
Yes you can. The disadvantag is that it costs money to form an LLC and creates additional paperwork for you (not much money or paperwork though). The advantage is asset protection and limiting your personal liability. I would never dream of renting a property without and LLC or Corp. The potential loss is much greater than the cost of forming the LLC.
You can and should put the house in an LLC. A single member LLC really simplifies the process by allowing you to use your SS# as the tax id therefore not complicating your taxes at all. You still get all of the tax benefits of writing off any depreciation and expenses associated with the house as this flows through to you personally. This does not complicate paperwork with the exception of keeping up with your state filing fees. The only downside is the fees you pay to set up the LLC and your renewal fees. This is minimal compared to what it can cost you for a major issue related to the property. You never know what renters do in your house, but if you own it personally, you can be liable for anything that happens. You just never know when you are going to rent out to the neighborhood meth dealer. With an LLC, your loss is limited to what the LLC owns, or the house. That is it. Anyone who has rental properties and does not own it through an LLC is just crazy. I work with real estate investors every day helping them set up the proper structure for their LLC (and other entities) in all 50 states. Proper LLC formation is key to maximizing your tax benefits and minimizing your liability. Let me know if you need assistance.