Should I Get an LLC For Real Estate Investing?
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Should I Get an LLC For Real Estate Investing?


so should you get an LLC for your
real estate investing business I’m gonna go and answer that question in this video
so stick around hey what’s going on in Sam Kwok one of the Kwak brothers real
estate investor and in this video I’m gonna go and answer the question should
I get an LLC for my real estate investing business now before we go on I
just want to make sure you guys understand that I’m not an an attorney I
am NOT an accountant so please don’t misconstrue this video as a legal advice
be sure you consult the licensed attorney to get a better idea for your
situation and for your unique scenario cool so I’m just gonna go and explain to
you guys how we’re using our LLC my brother and I to grow our ghost
investing business as well as our passive income portfolio so an LLC
stands for limited liability company also interchangeably a limited liability
corporation so I’m gonna go and draw this on the board give you guys a visual
illustration a limited library corporation gives you certain features
and benefits in terms of legal protection there might be also tax
strategies that relate to LLC we’re not going to get into that today in fact
we’re gonna go and bring in an accountant and we’re gonna interview an
accountant to give you guys some tax benefits of using an LLC cool so in our
case we use an LLC as legal protection and here’s one of the protection that we
get to take advantage of using an LLC so we actually own several properties
inside of our LLC in fact we have multiple LLC’s and I’ll explain to you
guys why we have a rental property okay inside of an LLC let’s say for example
one day someone walks by our rental property trips and falls and decides to
sue us because they’re hurt now typically they’re gonna try to sue the
owner of the property in which in this case the owner of this rental property
is our LLC okay now when these when this person who tripped unfortunately sues
the LLC the LLC also creates a barrier a legal barrier between the LLC the the
the rental property and its possessions and
us personally okay so there’s a personal protection so they can’t sue us directly
they have to sue the LLC and when they let’s say they are successful and they
win the lawsuit you know we’re at fault we have to pay damages what’s nice is
that we are not liable for those damages the LLC is so that means they can’t come
after our personal possessions they can’t come after our personal property
that can’t come after our personal home they can’t come after our personal cars
we have this protection where it’s a separate entity between us us personally
and the LLC now there are certain things you can do to to break that barrier in
which you may want to consult your attorney as far as what you need to do
to keep that barrier and one of the things that my attorney is suggesting is
that make sure you have a separate bookkeeping have a separate bank account
separate policy separate standard procedures mainly because if you do end
up going to court the judge may want to see that you’ve been treating this LLC
this company as a separate thing so make sure and this is again this is not only
going fine so make sure you consult with an attorney but it our attorney is
suggesting that you keep all procedures bank account as well as how you handle
money separate from your personal account cool so that’s one of the things
that the LLC gives us as far as legal protection some some of the things that
could help you down the road another thing that that the LLC may also give
you in terms of benefits and while you may need one again you may not need one
right off the bat okay consult with an attorney on that but you may not need
one right off the bat what what is nice about the LLC is that you can go ahead
and set up a separate business bank account
you can go and set up a the LLC has its own tax ID you can also get a separate
business credit which actually is gonna be a separate video that we’re gonna go
and create but you can go and create a separate credit just for your business
so that your business credit and your personal credit is separate they have
different credit score’s they have different reports it’s it’s a
great way to build business cry if you have a poor personal credit so an
LLC may give you protection now the reason why we have separate and
different LLC’s okay we have multiple LLC’s in fact is mainly because we want
to keep the liability separate we don’t want one lawsuit to affect all of our
properties so let’s say all of our rental property all you know gosh
seventy nine units are all in one LLC okay let’s say we have multiple rental
properties inside of just one LLC now what tends to be the problem is that if
one of the rental property goes down in a lawsuit and we are you know we owe
millions of dollars in judgment we have to sell all of our other mental
properties inside that same LLC to satisfy that judgment or the law sort of
damage that we have to pay but if we have a separate LLC for example okay if
we decide to place our rental properties in different LLC’s okay one lawsuit here
in this this LLC is not going to go and infect our other LLC’s that we have and
they’re given properties so that way it gives us extra measure of protection in
case we run to a lawsuit or liability issues whatever the case might be all of
our other property is is being protected this is actually one of the big reasons
why ambulance companies use different LLC’s each ambulance may have its own
LLC so it might be a one giant ambulance company the ambulance company hat may
have its own you know mother holding company it may have different LLC’s for
individual ambulance trucks okay and one LLC might hold just one or two ambulance
trucks mainly because ambulances have liabilities right because what if there
was a mishandling of the patient and the patient dies well you know that they can
get in trouble you can get in lawsuit so they don’t want that one lawsuit
affecting all their other ambulance and trucks and other assets they may have so
they split up all these different assets into different LLC’s mainly
because of legal protections so be sure to consult within a licensed and
competent attorney whether you need an LLC or not it may depending on how much
asset you have what type of rental properties you have are you married are
you not that may all change the the answer to do you need an Alistar or not
maybe you need a living trust maybe you need a S corporation maybe you need a
limited partnership so an LLC is one of the more common entities at roasted
investors use to protect themselves protect the property as well as keep
things separate keep the liabilities separate from from the personal
liability as well as the business liability so I hope this answers your
question do you need an LLC or not my answer always is consult an attorney but
generally well for what we do we use an LLC for our legal protection as well as
keeping liability separate now be sure to go watch our other video on how to
buy rental property without using your own money or credit yes it’s possible
we’ve done it so we’re gonna show you guys how to do it go and click on this
video right here how to buy rental properties without using your own money
or credit I’ll see you guys there

4 Comments

  • jjoven1225

    How about the loan?
    For first rental, it’s hard to get a loan to LLC. And if you start as personal (FHA or conventional) then switch title to LLC, bank can ask to pay the balance. Any tips/idea to get around this?

  • Ernesto Z. Gutierrez

    Sam – do you guys have umbrella coverage for the LLC's? Now that I ask I'm not sure if that's even offered for LLC / Biz

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