Buying in LLCs, LLPs and Corporations
Firstly, the biggest advantage of the LLC, LLP or corporation is that it separates you, the investor, from the property itself. The most obvious example of this is if there were to be a lawsuit from a tenant for some reason. If you are not appropriately protected, they could go after your personal property as well in that lawsuit.
Obviously, if you have good management, this is quite rare, however, this level of protection is the best to ensure your overall safety and security in the years to come.
The biggest DIS-advantage of the LLC/corporation, is that as a new company with no financial history, getting funding will be more difficult. Just like a person who is just beginning to accumulate a credit history, a young company needs to show its credit worthiness. Until that time, just like the person, it will have to come up with more money down, have different loan terms, and a different interest rate.
Most people newly starting out in the world of investing Minnesota real estate choose to personally finance their first couple investments, then when those properties have accumulated enough equity to easily flip them into the LLC or corporation without additional funds needed, will go to their lender and do so quite easily. In the interim, usually an umbrella insurance policy is the most popular way to gain some additional protection for very little money.
