Attorney Thomas B. Burton answers a reader question about the right time to hire an attorney for the planned purchase of rental real estate for him and his wife and also gives entity selection advice for purchasing investment rental real estate properties.
Transcript of Video: Do I Need an Attorney Yet? We are Purchasing Rental Real Estate in the Near Future
This question has to do with small
business law and real estate and it's
from Menasha Wisconsin and the reader
asks the following do I need an attorney
yet question mark
my wife and I will be purchasing rental
property in the near future we will be
starting with a four-plex
or less in our own name to get better
financing terms we plan to owner
occupy for the time being I am thinking
we should create a business for tax and
liability purposes but I am unsure if we
can use the business since we are
planning on FHA financing and the
property will be in my personal name or
am I thinking wrong so I have some
concerns about hiring and paying an
attorney for something I may not be able
to use every dollar counts please help
okay so I would say you should consider
forming an LLC to own the rental
property if you owner occupy the unit
for the time being you could delay
forming an LLC until down the road at
which time you would transfer the title
into the LLC however if you have it
formed right away that LLC that is it
could be possible you could buy it
directly in the name of the LLC and then
transfer or buy it in your
individual name and then transfer it via
quick claim deed to the LLC after you
buy it and obtain the financing I know
that FHA loans are for individuals only
and that may be the part you're hearing
about here so you would want to check
and see if you're going to have to buy it
in your individual name anyway you might
to get the financing you might want to
do that and pay down the loan some and
get some equity and then check with your
financing institution and make sure you
could put it into the LLC in your
case like I said if you're going to live
there a little while maybe you buy it in
your individual name then once you move
out and no longer owner-occupy you put
set up the LLC and transfer the property
in the reason I like the LLC is that
it's a great vehicle for owning rental
property to separate your corporate
business liability from your personal
liability what
you're trying to do is drawing a circle
around your personal assets and keeping
them out of a potential lawsuit from the
operation you're running as a landlord
on this rental real estate you can check
out my other videos I have one on what
is the best entity for owning rental
real estate property and hint hint an LLC
is featured prominently so you could
watch that other video about the
benefits of the LLC but I think you're
on the right track here it's just going
depend on your timing with the financing
and how long you want to live in the
property when you actually might want to
form the LLC and put it in in general
once you form an LLC in Wisconsin each
year there's a $25 filing fee to keep it
active so it's very minimal it's not
like some states like California where
I've heard it's five to six hundred dollars
but there is that fee so if you don't
need it for one year you might wait one
year and then set it up the year you're
going to do it again watch my other videos
on that and if you're planning to be a
husband and wife LLC I have a video on the
special rule that allows you to be
multi-member LLC as a husband and wife and
still file your taxes on a Schedule C
that could save you three to five
hundred dollars on a partnership tax
return each year so I'd check out those
videos before proceeding Congrats
on getting into rental real estate and a
great question and thank you for asking!
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