When making any type of investment, there is always a risk that the investment could backfire. While the market value of properties tends to go upwards, recessions can occur unexpectedly, and money can be lost. This is why investors naturally want to protect their assets when making investments. One way to do this is to start a real estate holding company, otherwise known as a real estatelLimited liability company (LLC).
By creating an LLC for your investment, it means that if you lose money on the investment, your personal assets will not be affected. The following are the steps that you should take when creating a real estate LLC.
Set up the LLC
You'll need to set up the LLC before purchasing a property. You will need to choose a name for the holding company, and register it with the state and the IRS. You will then receive an employee identification number (EIN).
Open separate checking accounts
You should make sure that you have both a personal and a business checking account. This will help you ensure that you keep your LLC funds separate from your own expenses, and you'll also find it easier to do your bookkeeping.
Find a property
When you have everything set up, it's time to find a property, and get it under contract. To find a property that is best for you, you'll need to consider your goals and budget.
If you are interested in setting up a real estate LLC for the purpose of real estate investing, you should make sure that you have a good understanding of the pros and cons. An attorney can help answer any questions you may have.