LLC formation question

[AMRI]

I am looking to potentially form an LLC to put my property into as we will be renting it out. Of course, an LLC is safer than renting out property in my name and has some additional benefits such as tax write-offs for any improvements/repairs needed. However, as a military member my current property is in California, yet I am an Illinois resident. My next duty station is in Boston...if I make an LLC can I make one in Illinois to put all the property I acquire under it, regardless of the states I move to and acquire property in? Or would I need to form an LLC in each state the properties are located at? If so, how does that work when I am an Illinois resident with no physical address in the states where I have property? Is an LLC necessary?

 

[adjusterjack]

Is an LLC necessary?

I'll answer that first with a resounding "NO" an LLC is not necessary. I owned 3 rentals for 20 years and never had an LLC. Never had a problem.

Of course, an LLC is safer than renting out property in my name and has some additional benefits such as tax write-offs for any improvements/repairs needed.

Can't imagine where you got that idea. It's 100% wrong. As an individual you get the same tax write-offs for improvements, repairs, depreciation and expenses.

Take a look at IRS Schedule E and you'll see what I mean.

https://www.irs.gov/pub/irs-pdf/f1040se.pdf

Here's a couple of IRS publications that will seriously contribute to your education:

https://www.irs.gov/pub/irs-pdf/p527.pdf

You should also be studying the CA landlord tenant guide and statutes:

CA Codes (civ:1940-1954.1)

http://www.dca.ca.gov/publications/landlordbook/catenant.pdf

As for personal liability you can add landlord's liability coverage in increments of a million to your property insurance. Once you start renting out your home you will have to replace your homeowners policy with a landlord's policy. Your insurance agent can handle that.

I would caution you to avoid buying any more rentals and just keep to renting out the home that you can't live in while on active duty.

Take it from me, being an absentee landlord is a high risk proposition, not so much from a personal liability standpoint, but from a lose lots of money standpoint. There will be times when the property is unrented (expenses going out, nothing coming in) when the property is at risk of vandalism and other damage, and there will be tenants that stiff you on rent where you will have to go to court to evict them.

Bottom line, forget the LLC, won't do you a bit of good. Buy the proper insurance and know the laws backward and forward.

You wouldn't go into combat without intel about the enemy and plenty of ammo. Don't become a landlord without intel and ammo or you'll end up financially bloodied.

 

[Michael Wechsler]

And then there is the issue of operating an LLC with assets in a foreign state. You can tack on additional expenses.

A friend of mine had made an investment in Florida property. At first it went well, being a new unit. He even had a real estate management company handle the investment. He ended up taking a huge loss because the management company didn't have the same vested interests he did. And if you are an absentee landlord without a rental agent looking over your property, you're even worse off than he was. He learned about how metals could be stolen by thieves, especially when the property was vacant (you'd be shocked at what people will steal for the purpose of selling scrap metal.) Even copper telephone lines get stolen, in addition to parts from air conditioners. And then there was the condition of the apartment, dealing with tenants who were screened within the four corners of the agent's agreement but probably not passing an actual landlord's more discriminating eye.

It's not as easy as it seems in the late night commercials.