LLC or S Corp Real Estate Investing - Posted by Heeran

Posted by JHyre in Ohio on July 05, 2002 at 05:50:08:

Depends on the answer to 4 questions:

  1. What does your L/O as “buyer” look like (e.g.- rent credit? Declining or fixed option?)
  2. What does your L/O as “seller” look like (e.g.- How many tenants will actually exercise? After how long)?
  3. What do your personal finances look like?
  4. What state are you in?

I do not intend to answer these questions online. As a general rule, the transaxtions you contemplate are often treated as “held for sale”, as opposed to “held for investment”- often but not always, for details matter here. The shorter the holding period and the more often your lessees exercise, the more likely you are a “reseller”- in which case an entity that minimizes social security taxes (corporation or limited partnership) is probably best. If the L/O with you as tenent is more like a land contract, then you are probably treated as owning the property, in which case an LLC or LP is probably best.

John Hyre

LLC or S Corp Real Estate Investing - Posted by Heeran

Posted by Heeran on July 04, 2002 at 15:07:49:

I am choosing between forming an LLC or an S corp for real estate investing. I’m having a hard time making a distinction between the terms, “flipping” or “renting” Here is what I want to to. Lease from a seller with option to buy there house. Then subleasing to a Tenent/Buyer with option to buy from me. The term could be anywhere from 1 to 6 years. Is this considered flipping or renting? And what is the best business entity for this (an LLC or S Corp). I want to make sure that I choose an entity that will be the most tax friendly to me. Thank you in advance. I plan on doing this part time by the way and may elect to go full time in a year or so.