Should you transfer your properties into an LLC? Is an LLC favorable for taxes or liability? That’s the first question I’m answering on this Q&A edition of Investing in Real Estate!
On today’s episode, you’ll hear three great listener questions on LLCs, investing for cash flow, and leveraging investment properties. Click play to hear my answers to your best investing questions!
On this episode you’ll learn:
- The pros and cons of using an LLC for real estate investing.
- Why cash flow is an important investing metric.
- What to consider about leveraging your equity.
The Pros and Cons of Using an LLC for Real Estate Investing
The number one reason to put your rental property into an LLC is for liability resources. If and when you get sued, an LLC is going to protect your personal assets. Most, if not all, attorneys would advise that you have your properties in an LLC for this reason alone.
However, you may run into some issues with financing properties in an LLC. Many lenders will want a personal guarantee on any sort of loan, HELOC, or refinance. In that case, you may have to initiate a transfer into your personal name to attain financing. You could then transfer back into an LLC after the loan is finalized.
Why Cash Flow Is an Important Investing Metric
If you’re going to invest in real estate, I think it’s important to have some level of positive cash flow. If the numbers don’t make sense, then I wouldn’t advise moving forward with an investment. You’re going to want to at least see $100 in positive cash flow. I would never want you to start your investing career with negative cash flow. It might be a better move to park your funds in a high interest savings account until you can find a cash flow positive property in a landlord friendly state.
What to Consider About Leveraging Your Equity
If you have untapped equity, I’d recommend using that to grow your portfolio. You can pull those funds out with a HELOC, and put down payments on more properties. This won’t change your existing mortgages, yet will increase your cash flow and tax benefits.
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DISCLAIMER: I am not a financial adviser. I only express my opinion based on my experience. Your experience may be different. These videos are for educational and inspirational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. There is no guarantee of gains or losses on investments.
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