LLC drawbacks? - Posted by Kimberly

import · April 25, 2005, 1:00pm

Posted by John on April 25, 2005 at 22:06:17:

An LLC offers protection in a sue crazy world. If you would get sued only the assets of the LLC are at risk. I have a LLC set up for each property.
I am not really sure what your CPA is refering to because LLC’s are pass thru as far as taxes and they are reported on schedule E. I have heard this about corp’s though maybe he confused the two.
I am in VA so I don’t know much about your part of the country. Maybe Bill can jump in here.

import · April 25, 2005, 1:00pm

Posted by Kimberly on April 25, 2005 at 13:00:31:

I am going to rent out my townhome next month and I heard that it was best to turn it into an LLC. A friend of mine has a rental condo also and is looking into the same thing. However, this is what he has heard about it:

The lender who holds your loan will not like or accept the risk to be reassigned from you to a newly formed LLC or LP that has no financal history. In fact they have the right to call in the note meaning that is will be due and payable in full. So if that happened I would be forced to sell my property.

Is this true? If so, how do I get around this?

Should I start the LLC before it is rented out at the end of next month or wait for the renters to move in?

Thanks.

Kimberly

import · April 25, 2005, 7:00pm

Re: LLC drawbacks? - Posted by John

Posted by John on April 25, 2005 at 19:00:12:

When you deed property to LLC you are still responsible for mortgage. That does not change. I have several properties in LLC’s and have had for years and not heard a word from the lender.
I would form the LLC before you rent it out that way you are not the owner but just work for owner. Rent check should be made to LLC. You can use this to your advantage if you have isues with tennents also.

import · April 25, 2005, 8:08pm

Re: LLC drawbacks? - Posted by Kimberly

Posted by Kimberly on April 25, 2005 at 20:08:46:

Thank you so much, John. I called my CPA and he just told me to get liability insurance for the rental and not form an LLC which leads me to believe he isn’t a real estate investor.

I also heard from a friend that it is better to form an LLC in Nevada instead of California where I live and where my rental property is because of tax purposes. Do you know if there are drawbacks to doing this?

Thanks again.

Kimberly