Opening a LLC to manage rental property (mortgage, loan, insurance)

[Vin100]

Hi.
I need some opinion and suggestions. Shall really appreciate advice as I am not at all a financial guy.

I am looking forward to buy some real estate for investment and renting. I have been told that we should make a LLC company and buy and then rent the home in its name. This saves us from many liability issues.

I want to know...
1) What is the right time to make a LLC. Before purchasing home in personal name or after purchase of home and then transferring it.
2) If we make a LLC before, then how can that get a mortgage from bank for purchase of home. I believe banks have strict rules for investment property and not only the rate of interest is higher, they scrutinize you thoroughly. Why would they give mortgage to LLC company rather than individual since they can verify all the income tax records of individual.
3) If we purchase home in our name and have a mortgage on it, then can we transfer the home under the LLC so that while renting , it is officially rented by LLC? Will the bank allow transfer of name since the property is mortgaged? Or can the rent be under name of LLC without transferring the ownership to LLC company.
4) How should we start the process of making a LLC company? What is the approximate cost in the state of CT?
5) What are the tax implications in case we rent a property as an individual versus renting as a LLC?
Can we show that the individual gave a loan (without interest) of the down payment money to LLC to purchase property and then the part of rent is transferred back to individual from LLC as part of loan repayment? Will this help in saving tax from the rental income?

shall appreciate all help in guidance.
Thx.

[jw2]

You should look into Connecticut LLCs to see if they really will provide the protection you seek. You may find it won't protect you from liability as much as you have been told. Lookup [Connecticut LLC pierce] A high coverage liability policy may be better.

[Mattks]

Originally Posted by Vin100

Hi.
I need some opinion and suggestions. Shall really appreciate advice as I am not at all a financial guy.

I am looking forward to buy some real estate for investment and renting. I have been told that we should make a LLC company and buy and then rent the home in its name. This saves us from many liability issues.

I want to know...
1) What is the right time to make a LLC. Before purchasing home in personal name or after purchase of home and then transferring it.
2) If we make a LLC before, then how can that get a mortgage from bank for purchase of home. I believe banks have strict rules for investment property and not only the rate of interest is higher, they scrutinize you thoroughly. Why would they give mortgage to LLC company rather than individual since they can verify all the income tax records of individual.
3) If we purchase home in our name and have a mortgage on it, then can we transfer the home under the LLC so that while renting , it is officially rented by LLC? Will the bank allow transfer of name since the property is mortgaged? Or can the rent be under name of LLC without transferring the ownership to LLC company.
4) How should we start the process of making a LLC company? What is the approximate cost in the state of CT?
5) What are the tax implications in case we rent a property as an individual versus renting as a LLC?
Can we show that the individual gave a loan (without interest) of the down payment money to LLC to purchase property and then the part of rent is transferred back to individual from LLC as part of loan repayment? Will this help in saving tax from the rental income?

shall appreciate all help in guidance.
Thx.

1. Before you buy
2. Under a LLC, you can still use you personal income and assets to qualify. I've heard 20% down payment is common and 10 year least is most popular
3. Do llc first and it won't be that complicated, but you can transfer to llc anytime, the owner of the house has to be the LLC.
4. CT probably has an online website where you can create the LLC, or a government office where you can get the forms. It took me 10 minutes to make a LLC in Kansas once I found the website, super easy and cost me $300, CT will likely cost different amount
5. In Kansas rental income is exempt from income tax, probably not true in CT. But taxes will still be filed through your personal filing, every state will be a little different. You will have a specific tax form for rental properties. Again check CT government website.

[Utopian Slums]

Can this person set up an llc in another state? I know of an insurance company with an llc in Delaware but no business there?

If so, what are the most businesses friendly llcs?

[Mattks]

Sure, the llc can be based in any state. But for taxation purposes many states are not good. Delaware has many special corporations that are very good. Over 50% of all corporations (not llcs) are in Delaware and for good reason. If CT has high taxes for rental properties, it may make sense to look at basing the LLC in another state, but CT may not care where the ownership is, just the properties location. I doubt anyone here knows that specific information so you will just have to research it.