Protect Yourself and Your Investment Property: Establish an LLC

If you’ve decided that the time is right to get into the real estate market in Arizona and to purchase some investment property, you will want to speak with your legal counsel and/or accountant. You don’t have to lose a lot of sleep or jump through a lot of hoops to establish a business entity to protect yourself and your investment property purchase, but you will want to establish a Limited Liability Corporation (LLC). Many individuals who have gotten into real estate investing – purchasing property and renting to others – have found that a simple way to limit personal financial risk and liability is by establishing the LLC.

Investing with an LLC

Before you decide to invest in rental property, investors should take time to think about the reasons they want to invest and the types of income they hope to reap from the property. There are four types of real estate investment income: tax benefit realization, property appreciation, principal reduction and cash flow.

You will also need to decide whether you will be a passive or an active investor and the type of property you want to invest in – apartments or commercial property.

As an active investor you will be involved in the day-to-day management of the property – from dealing with tenant issues, leasing the apartments, showing apartments to potential renters, working with contractors to coordinate repairs. You would truly be a landlord in the truest sense of the word as you will also be the go-to person for all items apartment-related.

Passive investors are not hands-on landlords. In many instances the landlord might not even live in the same state in which he or she purchased the investment property. Passive investors are able to purchase property wherever the real estate market is most advantageous to the investment purchase. As a passive investor, you will hire an on-site manager and become the CEO of the investment property.

Regardless of whether you’re an active or a passive investor you will still be best served by establishing the LLC for the real estate investment purchase.

Jump to Part II of “Establish an LLC”

Need Help?

If you are not sure as to what legal document you currently have contact one of our professionals to help you with your estate planning. They will make sure you have all of your grounds covered and have the right legal documents that best suite your wants and needs.