Ask Michele | Jul 9, 2014
| By: Michele Lerner |
Q. My uncle mentioned that he’s buying a house using an LLC
instead of buying in his name. Should I buy my home using an LLC? What are the
benefits of buying with an LLC?
A. Buying a home through a Limited Liability Company (LLC)
is beneficial for two main reasons:
buying a home with an llc
1. Homeowners can maintain some privacy because the LLC is
listed as the property owner.
For buyers who don’t want nosy people to be able to locate
their addresses in public records, buying a home with an LLC is the preferred
way to buy property.
Many buyers of high-end properties prefer using an LLC,
because all property transfers are recorded and available to anyone who wants
to look up information on an address. An LLC offers a first level of defense
against a buyer’s name entering the public record.
2. Owners can protect more of their assets in the event of a
lawsuit.
If you own your residence in your name (as most people do),
someone who’s injured on your property can sue you directly.
While homeowner’s insurance (and umbrella insurance if you
have it) will cover the payments on a successful lawsuit up to a certain point,
your other assets––including your savings, investments and home equity––could
be garnished to pay the rest of the damages.
However, if you own your home in an LLC, then the lawsuit
can only name the LLC, and the only assets that can be used to pay off the suit
are those assets held in the LLC (which usually would just be your home.)
In addition, investors commonly use an LLC to purchase
properties they intend to rent to tenants because of the liability protection
offered by the structure. When you own your property as an LLC you pay your
property taxes through the LLC and can even funnel other costs of homeownership
through the LLC.
Keep in mind establishing an LLC will impact your property
taxes and future capital gains taxes. The impact varies from state to state,
but in most states you’ll need to pay an annual-report filing fee in addition
to your property taxes. You’ll also need to pay legal fees to set up an
LLC, which can be expensive depending on
the structure of your LLC.
If you’re considering buying a home with an LLC, it’s
important to consult an attorney and a tax advisor with experience in your
state. You need expert advice to understand the implications of buying property
under this type of ownership .
———
Send your real estate questions to Michele at
advice@realtor.com, and she may answer them in upcoming columns.
Related: Read previous Ask Michele columns.
Michele Lerner, author of “HOMEBUYING: Tough Times, First
Time, Any Time”, has been writing about real estate and personal finance since
1990. Her work has appeared in The Washington Post, MSN Real Estate, Fox
Business, The Motley Fool, Bankrate, HSH.com, The Washington Times and Daily
Finance
