Why open a LLC for an investment property.

Why Open an LLC As a Real Estate Investor 

Opening a limited liability company (LLC) is one of the best moves you can make as a foreign investor purchasing U.S. property. Even if you only plan to purchase one or two investment homes, this simple step in your investment strategy can save you both personally and financially.  

Below are just five of the benefits of setting up an LLC before investing in U.S. properties. If you’re interested in financing with Lendai, we highly recommend talking with your financial advisor to determine if this option is right for you.  

Avoid personal liability 

If you invest as a single homeowner, you are solely responsible for everything that happens on your property, even if you are not on-site. This means that any on-site accident, problem tenant, or financial emergency falls on your shoulders. For example, if your tenant has a visitor who becomes injured, they may sue you personally even if you were not present. While your homeowners insurance will cover most of this, anything that isn’t covered will be your responsibility.  

If you have an LLC, the company will be responsible instead of you. This means your personal assets – such as your primary residence and other investment properties – are off-limits legally. Even if the company goes under, you will be personally protected. This applies to all financial risks your property faces.  

Tax benefits 

LLC’s are designed for smaller companies and individual protections, and the U.S. provides favourable tax laws for them as such. If you own real estate as part of your investment portfolio, you will not have to pay taxes as both the company and as an individual. This “pass-through” taxation applies whether you are the sole owner of the LLC (single-member LLC) or one of a partnership (multi-member). 

Any income earned by the LLC will pass through to individual members for taxation, which typically offers lower rates than corporate taxes. This also makes U.S. filing simpler – you simply file a Schedule C for rental income as part of your regular tax return.  

Flexible management and estate planning 

If you form an LLC, you can appoint a manager to oversee your rental investments. This member is also given protection under the LLC and can oversee your properties while you are overseas. Forming an LLC may also make future estate planning and gifting options easier if you plan to include your properties as part of an inheritance. 

Simplified transfer process 

The transfer of an LLC may be easier than the transfer of property itself, especially when taxation comes into play. A simple transfer of membership can make it easy for new investors or those gifted with the properties to take over. The properties will still be owned by the LLC, with a simple transfer in management rather than the gifting of the properties themselves.  

Marketing advantage 

There is a sense of professionalism gained when renting as an LLC rather than as an individual. If renters see an individual’s name, they may have concerns about renting as opposed to renting from an established LLC. While the dynamics of the tenant/landlord relationship are the same, it often gives tenants peace of mind knowing that you are a serious investor rather than a first-time landlord.  

If you are ready to invest in a U.S. property, talk to your financial advisor and legal counsel about the many other benefits of opening an LLC as an investor. And, when you’re ready to begin the investment process, contact Lendai about financing options in the U.S. 

The information contained in this post has been provided by Lend A.I. Ltd. (and/or its affiliates) for information purposes only, and as such, this post shall not be interpreted as legal, professional, or commercial advice. While every care has been taken to ensure that the content is useful and accurate, Lend A.I. (and/or its affiliates) gives no guarantees, undertaking or warranties in this regard, and does not accept any legal liability or responsibility for the content or the accuracy of the information so provided, or, for any loss or damage caused arising directly or indirectly in connection with reliance on the use of such information.

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