Why should I do this first?
The primary reason is that it will cost you transfer taxes if you decide to hold title differently later. The second reason is that you want county records to show a business address associated with an LLC or LLP – not your home address. Once your home address is recorded, it’s recorded forever and tenants can find you.
How should I hold title?
If you are a US Citizen, we recommend using an LLC. If you area Canadian, we recommend holding title as an LLP.
Can you set up an LLC or LLP for me?
Yes. Please see our rates and fees.
How much does it cost to maintain an LLC?
Nevada is about $400 / year if you do it yourself. We charge $100 on top of that if you want us to be your registered agent.
What else can I do to protect myself?
Put your LLCs in a trust. You create an additional barrier against lawsuits AND you provide a better method for transferring your wealth when you eventually check out.
Holding Title Tips
Disclaimer
If you want legal more legal advice, please consult your attorney or ours. We are in the real estate business and legal /tax questions are best handled with these professionals. Our specialty is finding properties and managing them for our investors.
If you are paying cash, create an LLC or LLP First
The cost of moving a property from privately owned to a different entity includes sales transfer taxes which is about 1.5% of the value of the property. You can save money by titling the property to the LLC or LLP from the beginning. The major benefit of having a property in an LLC/LLP is so that you shield your personal assets from possible litigation.
If you are getting a loan, you can transfer the asset to the LLC or LLP later.
Most investors do not have an LLC or LLP that is capable of getting a loan in that entity’s name. However, it’s a good time to start. Over time, that entity will have the credit history to purchase its own assets. This is long term strategic thinking that many investors don’t consider.
Citizenship Recommendations
We recommend US Citizens use an LLC while Canadians should use an LLP. All other countries have different rules and we haven’t created a table yet for the rest of you folks. However, at the time of writing, anyone can form a company in Nevada. You do not have to be a resident or a US citizen.
Protect Yourself Further
You can get additional protection from lawsuits by putting your legal entities into a living trust. Not only does this give you additional protection, it provides you with a cleaner method of transferring your wealth when your time has come. Since you don’t know when that is, just do it now.
Get a Private Mail Box – NOT A US POST OFFICE BOX
A Private mailbox is not the same as a Post Office Box. They sound the same but they are radically different. A private mailbox has a physical street address with a suite number. Title companies and the tax assessor will interpret a private mailbox as a business address and will accept that if you keep quiet as to what it actually is. The benefit to you is that your tenants will not know where you live. Plus it can be used to receive all types of shipments and packages, not just postal mail. Nothing will get your spouse pissed off more than having some hostile tenant pounding on your door at 7pm.
Record of owner address should not be the property address.
Under no circumstances should you make your investment property address the address of record. You do not want tax bills and other urgent and important items ending up in the hands of your tenants. They will not forward those important documents to you. Use your private mailbox as the owner address for all records. There is nothing more distressful than having tax liens on your property. Tax liens are very difficult to remove and show up on your credit. This should run shivers down your spine.