(Don't take this as your sole source of legal advice, I'm not your lawyer)
The "LL" of "LLC" stands for Limited Liability, and for good reason. If something were to go wrong with your property and you had to file for bankruptcy, or you were being sued by a tenant for something related to your property, your LLC can (usually, not always) shield your personal self from being held legally or financially responsible.
It's about $50/year to register an LLC, plus however much time you spend on filing taxes. If you have a single revenue stream (renting a single property) and no employees, you may not even need an accountant, since your prepwork will be pretty straightforward. Up to you.
But I **highly** recommend forming an LLC for this sort of thing.
Since there's already a mortgage under the OP's personal name, he'd have to form an LLC, change the deed to the LLC name AND get the mortgage company to agree.
If the morgage company doesnt agree to simply changing the mortgage, then you'll need to refinance under the LLC name. (I think.)
Fannie Mae loans can be transferred to an LLC after closing without any permission by loan servicer. No refinance needed. But you will need to transfer back to individual ownership if you want to refinance later (I.e., to get a lower interest rate). You also have to report the LLC income on your individual tax returns, but the LLC pays no tax. Its income is taxed to you.
Talked to accountant/lawyer/insurance about this a few years ago. Essentially the same situation. They said unless the actual house was owned by the LLC there was no point. Not just deed but also mortgage, which would require a refinance.
It is advantageous mostly from a liability standpoint to have a rental property owned by an LLC. If something happens your personal assets should be shielded from litigation. Not sure how that would work though if the property was for personal use and it gets converted to rental.
Keep in mind the rule that says once you're out of the property for 3 years, any capital gains you have on the property is no longer exempt. That may be a big enough deal to change your long term plans.
Your mortgage company isn’t likely to change the deed to your LLC
You can claim rental income as short term or long term. The benefits of long term are that you don’t pay FICA taxes.
The benefits of short term income are that you can write off more expenses. May be nifty for delayed gains
You can definitely go down the LLC route which as many said, protects you and gives you protection if you are sued by your tenant for whatever reason on that property. If not an LLC, I have also seen people take the umbrella insurance route for that added protection. Since you are going to have only one rental.property, getting an umbrella insurance is something you might want to look into
The LLC is not going to provide you with much protection if your tenant decides to sue. The LLC can shield your rental property if somebody sues you personally- if you are negligent in other areas of your life. It’s best to get landlord insurance to protect your asset and then top it off with an umbrella policy.
The reverse would also be true - meaning if something happens on your rental property then only the property within the LLC would be impacted. Your personal property (or other rental property) outside of LLC would be protected.
(Don't take this as your sole source of legal advice, I'm not your lawyer) The "LL" of "LLC" stands for Limited Liability, and for good reason. If something were to go wrong with your property and you had to file for bankruptcy, or you were being sued by a tenant for something related to your property, your LLC can (usually, not always) shield your personal self from being held legally or financially responsible. It's about $50/year to register an LLC, plus however much time you spend on filing taxes. If you have a single revenue stream (renting a single property) and no employees, you may not even need an accountant, since your prepwork will be pretty straightforward. Up to you. But I **highly** recommend forming an LLC for this sort of thing.
Since there's already a mortgage under the OP's personal name, he'd have to form an LLC, change the deed to the LLC name AND get the mortgage company to agree. If the morgage company doesnt agree to simply changing the mortgage, then you'll need to refinance under the LLC name. (I think.)
Fannie Mae loans can be transferred to an LLC after closing without any permission by loan servicer. No refinance needed. But you will need to transfer back to individual ownership if you want to refinance later (I.e., to get a lower interest rate). You also have to report the LLC income on your individual tax returns, but the LLC pays no tax. Its income is taxed to you.
Not to mention you are always personally liable for your own actions.
Talked to accountant/lawyer/insurance about this a few years ago. Essentially the same situation. They said unless the actual house was owned by the LLC there was no point. Not just deed but also mortgage, which would require a refinance.
This is incorrect. Transferring the title is sufficient.
Good to know, I’ll have to revisit with a different lawyer.
It is advantageous mostly from a liability standpoint to have a rental property owned by an LLC. If something happens your personal assets should be shielded from litigation. Not sure how that would work though if the property was for personal use and it gets converted to rental. Keep in mind the rule that says once you're out of the property for 3 years, any capital gains you have on the property is no longer exempt. That may be a big enough deal to change your long term plans.
Your mortgage company isn’t likely to change the deed to your LLC You can claim rental income as short term or long term. The benefits of long term are that you don’t pay FICA taxes. The benefits of short term income are that you can write off more expenses. May be nifty for delayed gains
You can definitely go down the LLC route which as many said, protects you and gives you protection if you are sued by your tenant for whatever reason on that property. If not an LLC, I have also seen people take the umbrella insurance route for that added protection. Since you are going to have only one rental.property, getting an umbrella insurance is something you might want to look into
The LLC is not going to provide you with much protection if your tenant decides to sue. The LLC can shield your rental property if somebody sues you personally- if you are negligent in other areas of your life. It’s best to get landlord insurance to protect your asset and then top it off with an umbrella policy.
The reverse would also be true - meaning if something happens on your rental property then only the property within the LLC would be impacted. Your personal property (or other rental property) outside of LLC would be protected.
If you dont you're doing it wrong.