Why shouldn’t real estate investors attempt to transfer their investment property, and contract, to an LLC?
As real estate education has become increasingly available to aspiring investors, many are gaining access to more advanced tips and strategies. Unfortunately, those attempting to piece their own real estate education together from fragmented tips usually get the steps out of order, or are completely unaware of some of the serious consequences their actions may result in.
Sometimes, poorly executed missteps occur while transferring title to an investment property under an LLC or similar legal structure.
While the concept is sound, and a must for future deals, doing this after having already acquired investment properties can have a completely different outcome than the one that was anticipated.
It may not be a horrible idea, and could still be a valuable move for current real estate holdings. However, investors must be aware of how doing this after-the-fact affects the strategy.
Transferring title to investment properties under an LLC can be invaluable in terms of protecting against a wide variety of risks and liabilities. It can also minimize tax errors and maximize total returns.
Unfortunately, poorly executed it can also trigger extremely costly tax consequences, cause issues on contracts in progress (including voiding them and losing earnest money deposits), and voiding the legal and privacy protections LLCs offer.
However, just because you started incorporating this factor into your real estate investment strategy and system late doesn’t mean you can afford to neglect it altogether.
Do it, do it right, be aware of best practices and best solutions for making up for procrastinating.
