Home Buying in Hyde Park>Question Details

Philip, Home Buyer in Chicago, IL

I would like to learn about setting up a company to buy an investment property.

Asked by Philip, Chicago, IL Mon Aug 8, 2011

What are the steps you need to go through to setup a company that can buy, rent and sell properties?

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11
Are you looking to buy one property or several ? If you are looking to buy 1 or 2 properties that are not multi-units, I don't personally think you would need to start a company. But if you are going to buy, sell or rent several properties with in a years time it might be a good idea to start a company. That is only my opinion ! Your best option is to do some research starting with an realestate attorney and accountant.
1 vote Thank Flag Link Mon Aug 8, 2011
I personally think an LLC (Limited Liability Company) is the best way to go if investing in real estate. You can also form a Series LLC that will allow you to create sub-LLC's that are owned by a main LLC but each entity is liable unto itself (I'm not sure how it works if you want to sell one sub-LLC off on it's own, so make sure you check into that). The cost of forming LLC's are more expensive, however, so you will need to weigh those benefits against the costs. LLC's are also similar to S-Corps, but with an S-Corp your income can only be derived from leasing real estate up to a certain percentage. A regular corporation can do it, but it's subject to double-taxation because the corporation is taxed for it's income and you are taxed for any profits you take as well. An LLC is kind of like the best of both worlds because the LLC is taxed much like a sole proprietorship but provides certain safeguards. BUT EITHER WAY, TALK TO YOUR ATTORNEY AND ACCOUNTANT BEFORE YOU MAKE A DECISION; what's good for some may not be good for all, and you will want to discuss your specific situation with them. They will tell you the benefits and risks of LLC's and Corporations and what you can do with each.

Go to this website to read more so you know what kind of questions to ask your attorney and accountant: http://www.cyberdriveillinois.com/departments/business_servi…

Call me when you're ready to start making offers.

Anthony Cavalea
Broker-Owner
Able Realty
815-388-9300
1 vote Thank Flag Link Mon Aug 8, 2011
Work with an attorney..Setting up an LLC or Corp shouldn't cost you too much.
0 votes Thank Flag Link Fri Feb 1, 2013
Hi if you are still interested in the Jackson Park highlands are, I have a double lot for sale! The owner has builder contacts and is also a licensed plumber. Please let me know if you or anyone is interested, great price, please drop me an email at pocsports@yahoo.com
0 votes Thank Flag Link Mon Oct 15, 2012
philip- come into my office I have 20 questions to ask you- this is not a fourm that will help you in the long run- what exactly are you doing..if you can not explain it to me is the most simple terms you will never get money or have an exit stratagy.. this is way more complicated than you might imagine
Web Reference: http://www.joeschiller.net
0 votes Thank Flag Link Mon Aug 8, 2011
legalzoom.com fastest and probably most cost effective way. There are lots of info per each part of the process on the website and you can consult with an attorney through them as part of the package.
0 votes Thank Flag Link Mon Aug 8, 2011
The best person to talk to about this is your attorney. Not an open forum. There is too much person things that need to be discussed for this.
Web Reference: http://AmericorpRe.com
0 votes Thank Flag Link Mon Aug 8, 2011
Philip, it all depends on many factors. First, contact the Illinois Secretary of State about setting up an LLC or corporation. In many States you may do this online. Setting up the corporation is the easy part. Before spending the time and money to do this, I strongly suggest you speak with a CPA and make sure you will accomplish whatever your goal is and to discuss the best entity, e.g., C Corporation, S Corporation, LLC, LLP, etc.. The tax laws are very tricky and you do not want to waste your time, so get the advice of a CPA. I am not a CPA, but I do recall some tax laws about buying and selling in excess of perhaps 5 properties a year then you are classified as a trader and may pay some higher tax rates and lose some deductions. Not 100% sure, but that is my recollection.

If you decide to proceed as an entity then, before you buy any property, you must speak with your lender (unless the corporation is buying with cash) to see if that lender will allow the purchase in an entity (some will, some won't); however, most will require a personal guaranty.

You will also need to speak with the real estate licensing authority in your area. Some States say if you are buying and selling real estate as a business, rather than holding the properties for long term growth, you are in the business of real estate and must be licensed. I am not sure on Illinois law so just check with the real estate licensing authority there.

Jack Gillis, M.B.A., J.D.
Jack Gillis Realty Advisors
Nathan Grace Real Estate, Broker
5619 Dyer Street | Suite 100
Dallas, TX 75206
Cell: 214.718.4910
Email: Jack@JackGillisRealty.com
0 votes Thank Flag Link Mon Aug 8, 2011
I agree with Philip, and something he didn’t mention is it is more difficult to finance a property not owned by an individual. Some lenders will tell you to take title in your own name and then deed it to your company, technically that may trigger the due on sale clause in conventional mortgages.
0 votes Thank Flag Link Mon Aug 8, 2011
This is definitely worth exploring. There are a number of ways to do this. If you have a funded IRA you can invest in proprties with that source of cash and the cost and income from the property flow in and out of the IRA with the same tax benefits as the IRA. When you sell the property - let's assume for a gain - the tax on that gain goes into your IRA and is tax deferred until you start pulling from your IRA - probably when your tax rate is lower. You can also set up a company to invest in real estate. THe benefits of that from a tax point of view are more complicated and we would need to pull in an accountant to review the specifics. I can connect you to experts who can provide details for these investment scenarios. I can also connect you to individuals who have done exactly what you are looking to do and they can give you the real world perspective.
Jody Wise
773.572.6531
Prudential Rubloff
0 votes Thank Flag Link Mon Aug 8, 2011
Why would you want to do that? There are tax/legal issues with respect to liabilitry and other things to consider. You need to speak with an accountant and attorney to see your options. Those folks do not respond on trulia.
0 votes Thank Flag Link Mon Aug 8, 2011
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