Epic Real Estate Investing - Where to Form an LLC for Real Estate? | 1184

Episode Date: March 10, 2022

There are a lot of options on where to go to form your LLC for real estate investing. Therefore, in today’s episode, Matt will show you what is the best option for you! BUT BEFORE THAT, you will learn if you need an LLC to wholesale realty and how much money you need to start investing in immovables. Tune in and find out more!   Let's go! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terio Media. Do you need an LLC to wholesale real estate? And that's an important question that you probably want to know because you don't want to get yourself into any trouble and you probably don't want to pay any unnecessary taxes either. If that's what you're thinking, I want you know that's very prudent of you. And how you proceed from here can have a significant impact on your wholesaling, one way or the other. So let's go through it together. So you know exactly what there is for you to do specifically. So you really don't have to worry about this anymore.

All right? Let's go. Welcome to the all-new, Epic Real Estate Investing Show, the longest running real estate investing podcast on the interwebs, your source for housing market updates, creative investing strategies, and everything else you need to retire early. Some audio may be pulled from our weekly videos

and may require visual support. To get the full premium experience, check out Epic Real Estate's YouTube channel, epic rei.tv. If you want to make money in real estate, Sit tight and stay tuned. If you want to go far, share this with a friend. If you want to go fast, go to reiase.com.

Here's Matt. So now I'm going to go over how using an LLC can help your wholesaling business and whether or not you even need one. I'm going to cover specifically, one, the protection an LLC provides, two, the tax benefits that accompany with it, and third, how you can actually find extra money for your business. And if you decide getting an LLC to, using your wholesaling business and you need some help doing that, I'll show you how to get that help

at the end. So, an LLC, it's a limited liability company. And the big question is, do you need one for your wholesaling business? The quick answer is no. You do not need an LLC for your business. However, it is advisable that you do create one before you begin. You don't want to do what many other wholesalers do and procrastinate on setting this up. Because what that can do is it can expose yourself to unnecessary expenses and also expose you to unnecessary liability. And there are four specific reasons that you're going to want to set up an LLC as soon as possible. The first one is the limited liability protection. If you find yourself in a situation where a creditor or a lawsuit comes your way, an LLC can protect you, can shelter

your personal assets from that type of issue. So, forming LLC also unlocks the potential for you to open up bank accounts, to form contracts, to hire employees, and get business licenses and business permits without the personal liability. Number two, LLC taxation. Unlike a corporation and an LLC is not subject to double taxation. And if done right, it can also reduce the amount of self-employment tax that you have to pay if you didn't have that LLC. Now, depending on the amount of business you do, these two numbers alone can be significant,

can have an amazing impact, a positive impact to your bottom line. The alternative, it could be really painful on tax day if you get this part wrong. Three, you can create more profit for yourself when you're conducting double closes in your wholesaling business. Because you can essentially avoid that B2C contract and all the expenses that come along with it and just simply sell your LLC to the new buyer. So as a wholesaler, you want these tools in your toolbox from the very beginning. So the big question is, now how do you form an LLC? Most wholesalers and real estate investors will put off this endeavor because they perceive it to be a complicated and or inexpensive endeavor. And that is so not true.

And to help you with this, I'm going to go ahead and introduce you to some experts that help me set up my entities, help me set up my client's entities, and help them do it the right way. And that's available to you also. So I've set up a deal, an arrangement for my clients to get some expert help to where they can hop on the phone with an expert for up to an hour and brainstorm some ideas about what the benefits of using an LLC in their business would be like because everyone's a little bit different.

And then if you decide you want to move forward, they can go ahead and they can set that LLC up for you. They'll do all of the work for you. And here's the best part. They've even agreed to pick up a bulk of the expense, the majority of that expense that you might expect to pay for setting up an entity like this. So what's the catch? I mean, there's always a catch, right? Nothing's for free. Well, what they've decided to do is do their initial services for almost nothing to prove to you how good they are. And if you like their services, there's a really good chance that you will do future business with them as well. That's it. I mean, it's the old, show them how you can help them by actually helping them.

trick. So, they'll take a look at your situation, they'll look at all the nuances and the variables that could be involved in your business, and they're going to make sure that you are set up the right way. When it's done correctly, you can write off potentially 250 different deductions against your taxes, translating to saving you absolutely thousands of dollars that you would normally have to pay, even if you're just starting off. If you like the idea of this, you like the way this sounds, you can get the rest of the details by visiting free entity.com. We'll be back with more right after this. Hope is not a financial strategy.

Let's get back to work. How much money to get started in real estate? That's a good question because more and more people are looking at real estate to pursue, whether on the side or doing it full time so they can walk away from their job. But the startup costs, the capital, how much do you need to actually get started? I think you'll be surprised of how little it actually is. I'm going to quickly cover why real estate is something that you probably should be considering. then I'm going to give you three different options of how to get started with their

corresponding costs so that you can pick the best one for yourself. And then if you decide that you want some more help, at the end, I'll show you how to get it. Now, there are many reasons to get involved in real estate, from income to portfolio diversification. During times of volatility in the stocks and the bond markets, investors will turn to hard assets like real estate. In the past decade, as another example, purchasing second homes and turning those into short-term rentals has really grown in popularity for investors. And there are several ways to get started in real estate that don't require a whole lot of money. I'm going to give you three examples and their

costs. Now, the cheapest one is a REIT, a real estate investment trust. And you can get started inside of a REIT from anywhere to $1,000 to $5,000. You don't need a whole lot of money to get started there. Now, Reese were first created in the 1960s, and they were created to allow investors to participate in commercial real estate. The real estate investment trust is one of the cheapest options available to add real estate to a portfolio. Now, you don't actually own the real estate, though. These are securities and they are traded on the stock market on Wall Street. These funds, they invest in real estate directly, either through property purchases or

through mortgage investments. Many REITs specialize in a particular type of real estate or a specific region. A REIT offers the investor a high dividend, relatively speaking, and a high amount of liquidity in their real estate. Many investors like this type of real estate investment because traditional real estate investments aren't easy to get out of. An exchange traded reet absolutely is. It's 100% liquid. Moreover, you can start with a very small amount of cash. Now, if you're in it for the long term, consider a REIT that offers a dividend reinvestment plan. Number two, moving up the cost ladder,

consider a real estate investment group. And this investment participation could be as low as $2,000 up to $50,000. So for investors seeking to own the actual real estate as opposed to shares of real estate like you do on a real estate investment trust, a REG, a real estate investment, investment group might be the right fit for you. So a real estate investment group allows an investor to purchase one or two units of living space within an apartment or a condo building. The operating company collectively manages all of the units and is responsible for marketing them. In exchange, the operating company takes their share of the operating income, the monthly income. So a real estate investment group, it represents a rather cost-effective way to own the actual real estate

itself, all the while taking the management responsibilities off of you, the investor. So, like I said, some real estate investment groups can be as little as a $5,000 commitment up to $50,000, not enough to buy a whole property. So what they do is they pool a number of investors to own the property together. The goal for investing in a real estate investment group should be to find one that actually pays you a monthly cash flow, a monthly dividend. Number three, investing in income properties. Typically, $100,000 or more is what it's going to take to get involved here.

The tried and true way of investing in real estate is also, the most expensive way and probably the most labor intensive way too. And we're all familiar with this basic idea. You, the investor, you go in and you buy a property and then you take it over. You might have to do a little bit of repair for the property to get it ready for your tenant. Then you go out and find the tenant. The tenant moves into the property and they give you a monthly fee to occupy that space. The owner is responsible for paying the mortgages, paying the taxes and typically taking care of the utilities and the maintenance.

Ideally, the rent will cover the costs, maybe over time, also, provide income or growth or both. Now, depending on the seller or the lender, you may need as much as 20% down. You don't need to come in with the whole $100,000. It's 20% down and maybe some closing costs and that can get you in. Now, if you decide to purchase a fixer-upper, you might have some construction costs or some rehab costs also. Now, the amount of money that you need to purchase an investment property like this, it can vary and very greatly. It depends on the type of property you're going to purchase, where it's going to be located, what its condition was going to be, and what type of condition you want it to be in and the list goes on and on and on. For example,

a fixer-upper in Southern California, that might run you $500,000. And that same like property in St. Louis, Missouri might cost you just $100,000. Now, when you own a rental property like this, whether it's a single-family house or it's a giant mega apartment complex, you're going to want some cash reserves for emergency repairs and occupancy gaps. Now, if you like the idea of actually owning the income property and owning the property itself, it might be a lot of, might make sense for you to talk to Mercedes. You can get started by downloading her investor packet, her free investor packet at cashflow savvy.com. And what Mercedes does is she'll go out and find the property for you, she'll fix it up, she'll put the tenant in place, she'll arrange

the property management, she'll even arrange the financing for you and just hand it to you on a silver platter as a cash flowing asset. So after you download her free investor package, you'll have the opportunity to pick a time to hop on the phone with her, to brainstorm some ideas about what making this type of investment would look like just for you. Go to cashflow savvy.com. Thanks for sitting tight while we pay our light bill. We'll be back. Right after this.

Ever hear someone say, I have too much money? Me neither. Let's get you some more. Back to the show. Where to form an LLC for real estate. And I understand the question because there's a lot of different services, a lot of different people and companies out there, vying for your attention to get your business. And it can be confusing as to which one is the best, specifically which one is the best for you.

The good news is you've got options. The better news is you're about to learn which one of those options is the best one for you and where to go to form your LLC for your real estate investing business. So I'm going to cover the steps of setting up an LLC, provide three different options of how you can get it done, and then the benefits you'd expect to receive once it is done. And then if you'd like some more help with this, I'll show you where you can actually go get this done and easy, affordable way. It's going to save you time and it ain't going to break the bank. A limited liability company, in other words, referred to as an LLC is a very popular business entity structure for real estate investors, for real estate investing businesses that are involved

in the buying and selling and the holding of real estate. The reason being is most business owners, most real estate investors want to make sure that they are protected from the numerous risks and the numerous landmines that can exist inside a real estate investing business. Makes sense, right? Nobody wants to be subject to that if they don't have to be. These risks can include but aren't limited to the depreciation of property, the risk that can come through construction. You know, you got to watch out for the contractors. And when you're doing rehabs, there's a lot of liability that can be there. And then also dealing with, you know, disgruntled tenants or, you know, difficult tenants. And one way to really mitigate these risks and remove you from this type of potential mayhem is to set up a business entity to set up NLLC.

I'll let you in on where you can actually have this done, but I'm going to walk you through the seven steps of what it takes to set up an LLC. Number one, pick a business name. Two, file articles of organization. Three, appoint a registered agent. Four, create an operating agreement. Five, obtain an employer identification number. Six, pay the filing fees and seven, pay taxes.

Now, there are three primary places, three different places where you can set up your LLC. First, a lawyer. And probably an obvious option. And probably the best option. But the con to that is it can typically be accompanied by a high attorney fee. But it's really good because they'll essentially do everything. You won't have to do really anything other than sign your documents. Second, an online service.

You might have heard of something like Legal Zoom, which can be a great place to go, especially if you know what you're doing. It's going to be very, very affordable also. But keep in mind, as much as they do for you, they can't do it all for you. There's going to be some certain steps that you're going to need to follow through on. Third, a consulting service where you can get some one-on-one help and have a low cost. You kind of get the best of both worlds there. And I'll be happy to introduce you to who we use so you can save some time and some money also.

Essentially, you'll get expert one-on-one help without the exorbitant fees. And I'll share with you that in just a second. So to gain all of the protections and the tax benefits of an LLC for your brother's that investment business, it is, you know, recommended to set that up before you ever start. conducting your business, including even buying your first property. The benefits of your LLC, they begin the moment that your LLC is formed. If you already have property and it's not an LLC, you can still put it in an LLC. Just understand it's going to be a little bit more complicated. It might be accompanied by a little higher cost as well. And it's something that you'll

definitely want to consult with an expert if you find yourself in this situation. You'll also have to decide where you want to form your LLC, particularly if you plan on operating in multiple states or owning property in multiple states. And this one's important because there are some certain landmines that you're going to want to avoid. There are certain states out there that are going to make sure you do it the right way and they will track you down if you don't. You don't want to be in that situation. Ask me how I know. Now, it is common to form your LLC in the state of which where you live, but there are some benefits to forming your LLC in other states. Delaware, Nevada, Wyoming, for example, are known for lower taxes. Reduced.

business formalities and simpler filing processes. Now, registering your LLC in a different state from where you live, that can complicate the process too. And to help you out with this, feel free to reach out to the experts that I use so you can get structured the right way. And save yourself a lot of time, save yourself a lot of money too. So I've worked out a deal for my clients to where you can get some one-on-one help. You can get a private strategy session to go ahead and look at the nuances of your business and brainstorm some new ideas, some different ideas that you might not have thought about that can really enhance your business and really preserve your bottom line while all the while protecting your assets.

And then, if it makes sense and you'd like them to do it for you, they will. And here's the best part. They've agreed to pick up the majority of the expenses that customarily accompany setting up an entity like this. So what's the catch, though? I mean, why would they do this? Why would they take that expense off your plate? Well, they know if you have the opportunity to work with them and you see the good work

that they do and how nicely that you're treated, you'll likely want to do business with them in the future. It's the old show you how we can help you by actually helping you trick. They're pretty sneaky that way. They'll look at your situation. They'll take care of all the little nuances. They'll make sure that the eyes are dotted, the T's are crossed to make sure that you are set up, your whole business is set up the right way.

Because when it's done correctly, you're going to have access to up to 250 different expenses that you can write off, saving you thousands and thousands of dollars, essentially each and every year that you're in business. That's even if you're starting out. That happens day one. If you like the idea of this, get the rest of the details by visiting freeentity.com. And that wraps up the epic show. If you found this episode valuable, who else do you know that might too?

There's a really good chance you know someone else who would. And when their name comes to mind, please share it with them. And ask them to click the subscribe button when they get here and I'll take great care of them. God loves you and so do I. Health, peace, blessings and success to you. I'm Matt Terrio. Living the dream. We got the cash flow

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