Is Starting A Real Estate Investment LLC A Good Idea?

Real Estate Investing LLC

This week on The Mindset Transformation Radio show and Podcast with Coach Myrna and Rich Dad trainer Trevor Evans, we discuss the topic “Is Starting A Real Estate Investment LLC A Good Idea?”

This is the 6th episode in our Funding, Fixing, and Flipping Series:
Listen in to understand how important setting up your Real Estate Investment business with the right tax structure, would allow you to keep most of your investment income and not pay all of it to the tax man!

Tip of the week from Coach Myrna: Landlord LLC benefits
If you hold and rent Real Estate, this article could offer massive insight on one possible way to structure your company. We are not giving legal advice, just questions for you to ask you asset protection attorney.
Keeping in mind the risks associated with opening your business as a sole proprietorship, consider using this scenario for your business.

Open an LLC, purchase a property, but don’t manage it. That’s right, don’t be the one to manage the property. You can use the combination of a C-Corp and an LLC. Let the C-Corp manage the company. This is good to reduce liabilities. How? Let’s take an example.

For the last four months, the tenants have been complaining that the parking lot in the complex you own is too dark. They don’t feel safe walking to and from their cars at night and want to have you install more street lights to brighten up the area. They continue to complain to the management company, the C-Corp, letting them know of the issue. Having not addressed the concerns, the parking lot remains dark and one night, while walking in from her car, a young mother of two who live in your property is robbed at gun point in the dark parking lot. When she sues, who is liable? The LLC? They own the property, so it would be them, right? Wrong.
The C-Corp, as the managing entity, is the responsible party when it comes to any damages and liabilities incurred because of this incident.
The LLC, having limited liability, is protected. This is something very important to keep in mind when making the decision on which type of entity you wish to use.

For more information on setting up the structure of your Real Estate Investment business, check out this Connected Investor Blog post

http://connectedinvestors.com/blog/real-estate-investment-llc-vs-s-corp/

So, What are the Pro’s and Con’s of LLC for Real Estate Investing? Is starting a Real Estate Investment LLC a good idea?
Tune in to hear Trevor’s answer.

What exactly are the major differences between an S-Corp, C-Corp and an LLC as it relates to real estate investing?

A C-Corp is a management entity. As per my tip of the week. Use your C-Corp to manage your rental properties.
So, in case you are sued for negligence, the C-Corp would be the benefactor of the law suit and you as the owner would have no liability.
The C-Corp also has more leniency in regards to what expenses can be written off; but the biggest benefit of having a C-Corp manage your rental properties, is the ability for the C-Corp to collect rental revenues and pay the HOA dues and other expenses from these revenues. You as the owner of the property, would only be responsible for your positive cash flow at the end of the month.

If you were collecting the rents in your personal name then you would have to claim the entire amount as income.

LLC – A single member LLC offers no asset protection and is charged with self employment tax.
A multiple member LLC has asset protection.
A multiple member LLC, members are not liable for debt incurred by the LLC
A multiple member LLC can be viewed by the IRS as a partnership and as such the members can determine the split or who gets what.

S-Corp or self corporation is a flow through entity.
Used primarily to expense big ticket items that cannot be expensed by the LLC.
The S-corp does not pay taxes, its members file a K1 for any income not written off and that income is taxed at their income level.

Some other questions answered by Trevor:
I have a rental property in my personal name, can you tell me the pros and cons of transferring that property in an LLC?

I have no mortgage on this property. Could I have transferred it into an LLC if I had a mortgage on it?

What are the states that have the most conducive laws that benefit the Real Estate Investor and protect the LLC?
Can you explain some of the benefits of incorporating or forming an LLC in Florida?

For additional reading, here is an article on “Is Starting A Real Estate Investment LLC In Your Future?
As Investopedia so eloquently puts it LLCs are a “corporate structure whereby the members of the company cannot be held personally liable for the company’s debts or liabilities. Limited liability companies are essentially hybrid entities that combine the characteristics of a corporation and a partnership or sole proprietorship.”

If you found this blog post and podcast inspiring, please Subscribe, rate, and review this podcast, then send me an email to info@myhelps.us with the subject line “podcast review”

and I will send you a Free Gift! The Mindset Shift Focus Wheel.

This is a workbook to change your Mindset from a Fixed Mindset to a Growth Mindset. This is so important for success in investing. It will allow you to look at an opportunity with the eyes of an Investor and not with the eyes of an employee. As an employee you have the Mindset of limits and security.
Until next time Namaste.

How to Invest in Real Estate with No Money

How to Invest in Real Estate with no Cash

This week on the Fund, Fix and Flip Real Estate Investment series, Trainer Trevor Evans teaches How to Invest in Real Estate with No Money.
In this segment Trevor teaches our listeners on the following:
1. What are some strategies to purchase real estate with little or no cash?

2. What does Hard money lenders look for in a good deal?

3. How do you make your deal attractive to a Hard money lender?

Strategies to use other people’s money to fund your real estate investments:

1. Using your credit cards to fund your deals. The more credit you have the better off you are!

2. Hard money Lenders. Hard money lenders look at the asset and not at your credit score.

3. Borrow money from friends and family. You convert them into Hard Money lenders and pay them a good interest rate.

4. Borrow from your Whole Life Insurance policy.

2. Take a loan from your 401K.

3. Take out an Equity line of credit on your personal house.

The commonly used strategy in real estate investing is the use of a Hard Money Lender.
So, if the Hard money lender does not look at your credit, what does he look for?

1. Your expertise. Most Hard money lenders want you to have 3 investments under your name. This does not include your personal residence.

2. The ARV or after repair value. The property must have equity before the deal is made.

3. How did the property come on the market. Eg is it a Foreclosure, short sale or probate.

4. What is your exit strategy? Are you buying to hold or buying to rehab and Flip.

5. How long you need to complete rehab work.

6. How much is the estimated cost of repairs.

Hard money Lending

Tip of the week:

Confessions of a Hard Money Lender -And Why We Hate Hearing “I Need 100% Financing”

Make no mistake, hard money lenders need borrowers to deploy their capital and get a return on investment for their capital partners. They often enjoy repeat business – real estate investors aren’t typically one-time borrowers, so asset-based lenders like hard money lenders or private money lenders value the business relationships they develop with quality borrowers.
One way to invest in real estate with no money down or little or no cash is to borrow from Hard money lenders who charge high interest for short term loans. When hard money lenders provide a loan, they want to be confident that the borrower is able to repay the loan on time. If the borrower isn’t able to pay back the loan, this creates a great deal of extra work, stress and potential financial loss for the lender. A strong borrower with a significant down payment (or equity in the property) and cash reserves has the best chance of obtaining a hard money loan and succeeding with their real estate project.

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Looking for a Hard Money Lender? Here is an article from Connected Investors on how to get bids on your project.

real-estate-investing-funding-portal-

Connected Investors, the world’s largest real estate investors network and marketplace, today announced the launch of the first centralized real estate investment funding portal, CiX.com. The technology allows real estate investors to quickly and easily submit their deals to a network of asset-based lenders, ensuring the best terms for loans on their investment properties.

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