Buying RE in a Corp Entity Versus in Your Own Name ?

[Coronita]

Please excuse any incorrect terminology I might be using to try to convey my question.

In looking at the existing ownership of some properties all over SD, I noticed that while the majority of properties are owned by individuals or trusts with the beneficiary being the individual(s), some properties that don’t appear to be owned by any specific person(s) or trusts of that person, but instead by a corporate entity (LLC,C-corp,etc), probably setup by the individual(s)

Considering that I want to purchase a few rental properties moving forward, can knowledgeable folks provide some insight into example situations of when I would want to setup a corp entity and buy property under that entity versus in my own name?

I’m not trying to ask ask for detailed legal/accounting advice, but would appreciate a general understanding of key pro’s/con’s and motivations of why some people would do this….specifically if you at some point or the other had/have owned several properties (dozen+)….why you did or didn’t do this?

It usually comes to my mind that this would be done for liability/asset protection purposes, but then I remember reading on this board that that might be a misconception in this. I guess there are other things regarding taxation/income too. What would be other key the motivations buying property in a corp entity and dealing with the extra overhead?

Thanks in advance.

Side note: as a landlord, what steps can you take to distance yourself from tenants such as to not be readily reachable? I understand that you could use a different mailing address from your home, even use a property manager so you don’t deal with them directly. But I was referring more or less not being searchable via public records, as I indicated you can easily do on a previous thread. I sort of what to be as obscure as possible…

[Coronita]

bump.

[Coronita]

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[Coronita]

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[Coronita]

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[Coronita]

bump.

[meadandale]

I’m no expert on this by any means but I’d imagine most people buy investment property through a corporation for the corporate shield (firewall).

Most of the same reasons that apply to incorporating as a small business owner apply with real estate investing.

I’d go so far as to say that it also makes sense to have each property that you have be owned by a separate LLC.

This way, any liabilities that you have for one of your properties (tenant lawsuit, etc) don’t bleed over and affect any of your other properties. For instance, you could declare bankruptcy on one property (corporation) and all your personal assets (as well as your other properties) are protected.

[meadandale]

I’m no expert on this by any means but I’d imagine most people buy investment property through a corporation for the corporate shield (firewall).

Most of the same reasons that apply to incorporating as a small business owner apply with real estate investing.

I’d go so far as to say that it also makes sense to have each property that you have be owned by a separate LLC.

This way, any liabilities that you have for one of your properties (tenant lawsuit, etc) don’t bleed over and affect any of your other properties. For instance, you could declare bankruptcy on one property (corporation) and all your personal assets (as well as your other properties) are protected.

[meadandale]

I’m no expert on this by any means but I’d imagine most people buy investment property through a corporation for the corporate shield (firewall).

Most of the same reasons that apply to incorporating as a small business owner apply with real estate investing.

I’d go so far as to say that it also makes sense to have each property that you have be owned by a separate LLC.

This way, any liabilities that you have for one of your properties (tenant lawsuit, etc) don’t bleed over and affect any of your other properties. For instance, you could declare bankruptcy on one property (corporation) and all your personal assets (as well as your other properties) are protected.

[meadandale]

I’m no expert on this by any means but I’d imagine most people buy investment property through a corporation for the corporate shield (firewall).

Most of the same reasons that apply to incorporating as a small business owner apply with real estate investing.

I’d go so far as to say that it also makes sense to have each property that you have be owned by a separate LLC.

This way, any liabilities that you have for one of your properties (tenant lawsuit, etc) don’t bleed over and affect any of your other properties. For instance, you could declare bankruptcy on one property (corporation) and all your personal assets (as well as your other properties) are protected.

[meadandale]

I’m no expert on this by any means but I’d imagine most people buy investment property through a corporation for the corporate shield (firewall).

Most of the same reasons that apply to incorporating as a small business owner apply with real estate investing.

I’d go so far as to say that it also makes sense to have each property that you have be owned by a separate LLC.

This way, any liabilities that you have for one of your properties (tenant lawsuit, etc) don’t bleed over and affect any of your other properties. For instance, you could declare bankruptcy on one property (corporation) and all your personal assets (as well as your other properties) are protected.

[4plexowner]

I held each of my properties in its own LLC – as meadandale said, this isolates issues at one property from all the other properties – I considered the $800 / year for each of the LLCs as an insurance premium for my own financial security

it is easy to transfer real estate from an individual to an LLC – just record some paperwork with the city and it’s done – as long as both parties in the transfer are related, the transfer is not considered a sale and therefore no re-assessment of tax basis is required

seems like there are two ways to get residential real estate into a corp:
1. buy property as individual and transfer to corp
2. buy property as corp

I don’t know about number 1 – anyone else? – is this possible? – does it trigger a tax re-assessment? – what does the mortgage holder/servicer do when they receive a copy of the newly recorded transfer?

Number 2 is easy but the corp has to qualify to purchase the property – income, assets, credit history, etc

[4plexowner]

I held each of my properties in its own LLC – as meadandale said, this isolates issues at one property from all the other properties – I considered the $800 / year for each of the LLCs as an insurance premium for my own financial security

it is easy to transfer real estate from an individual to an LLC – just record some paperwork with the city and it’s done – as long as both parties in the transfer are related, the transfer is not considered a sale and therefore no re-assessment of tax basis is required

seems like there are two ways to get residential real estate into a corp:
1. buy property as individual and transfer to corp
2. buy property as corp

I don’t know about number 1 – anyone else? – is this possible? – does it trigger a tax re-assessment? – what does the mortgage holder/servicer do when they receive a copy of the newly recorded transfer?

Number 2 is easy but the corp has to qualify to purchase the property – income, assets, credit history, etc

[4plexowner]

I held each of my properties in its own LLC – as meadandale said, this isolates issues at one property from all the other properties – I considered the $800 / year for each of the LLCs as an insurance premium for my own financial security

it is easy to transfer real estate from an individual to an LLC – just record some paperwork with the city and it’s done – as long as both parties in the transfer are related, the transfer is not considered a sale and therefore no re-assessment of tax basis is required

seems like there are two ways to get residential real estate into a corp:
1. buy property as individual and transfer to corp
2. buy property as corp

I don’t know about number 1 – anyone else? – is this possible? – does it trigger a tax re-assessment? – what does the mortgage holder/servicer do when they receive a copy of the newly recorded transfer?

Number 2 is easy but the corp has to qualify to purchase the property – income, assets, credit history, etc

[4plexowner]

I held each of my properties in its own LLC – as meadandale said, this isolates issues at one property from all the other properties – I considered the $800 / year for each of the LLCs as an insurance premium for my own financial security

it is easy to transfer real estate from an individual to an LLC – just record some paperwork with the city and it’s done – as long as both parties in the transfer are related, the transfer is not considered a sale and therefore no re-assessment of tax basis is required

seems like there are two ways to get residential real estate into a corp:
1. buy property as individual and transfer to corp
2. buy property as corp

I don’t know about number 1 – anyone else? – is this possible? – does it trigger a tax re-assessment? – what does the mortgage holder/servicer do when they receive a copy of the newly recorded transfer?

Number 2 is easy but the corp has to qualify to purchase the property – income, assets, credit history, etc

[Author]

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