Archive for June 2017

The best way to hold rental real estate

If you’re investing in real estate (especially in rental real estate), you’re probably weighing your options and considering the safest way for you to hold that real estate.

In my opinion, an LLC is typically the best option in that situation, and not a corporation.

A limited liability company, or LLC, is a company structure where the members of the company cannot be held personally liable for the company’s debts or liabilities.

An LLC is more flexible than a corporation because the LLC can be managed by a single individual or a third party. The business will be able to file taxes as though it were a partnership or sole-proprietorship, while having legal protection. If an LLC is sued, the plaintiffs are suing the company, not the owners or investors.

The tax and civil laws are favorable for real estate LLCs, as well. I believe that rental real estate investments should never belong in a corporation.

Most of corporate real estate focuses on commercial properties instead of residential because they would need to “flip” the residential property within a year or face double taxation at the corporate level. If you’re investing in residential real estate, an LLC will give you more options than a corporation would.

Let’s pretend you have ten rental properties. You could have a series of eleven LLCs that covers you, as the owner, and the ten properties. The LLC does nothing but hold the properties for you. The eleventh LLC manages the ten others.

The ten properties’ LLC has a relationship with the one LLC, while the one LLC manages the other ten. That one LLC would be the main point of contact, responsible for the bank account, repairs, management, or anything else that is needed.

If you have any questions about LLCs, or any other business entities, please contact my office.

We would be happy to sit down with you to talk about the pros and cons of each of the entities that you can choose from.

Don’t get discouraged by driving in the ditch

Back in the day, I drove a 1974 powder blue Pinto station wagon. Once, a friend and I were planning on fishing in a hole that was way back in the woods. The road that I used to get there had ditches on both sides of it. When I was driving, my car started veering off into one ditch.

I knew if I stepped on the brake, I would get stuck in the ditch. I kept on the gas and eventually got back up on the road. Then, I started veering off into the other ditch. I spent about a third of the time from the main highway to the fishing hole in the ditches on both sides of the road.

We made it to the fishing hole in the end, even if that meant I took my Pinto four-wheeling!

There are usually ditches on both sides of the road, both literally and figuratively. In life, we have the tendency to think that going off into the ditch is going to be the worst thing that could ever happen to us.

But driving in the ditch doesn’t always mean that your direction is wrong. It just means there is another step to get back on the road. For me, the ditch eventually let me get back on the road.

When you’re in the ditch, it’s sometimes scary because it’s not the safety you’re used to from the road. It may take you a little longer to reach your destination. You’re still going in the direction you want to go, even if it’s not the way that you expected.

Until you decide that you don’t want to be on that specific road, it’s okay to be in the ditch. Just let everything smooth out until you can see the road again. You’ll get where you need to be eventually.