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Not sure if the original question was ever answered.
Do you buy a USA investment property under your own name or use an LLC??
First up, I am in the process of buying our first investment property in the USA and I have been vexed by this question. I am a nurse working in Adelaide with no legal experience so my response here is simply from researching stuff on the internet. I could be very very wrong but this is where I am at.
If you ask any US property attorney or review their websites, the answer is very clear = you would be 'insane' if you didn't setup an LLC and pour the property into it.
Why?
One word. "Litigation".
To protect your assets outside the LLC. If attacked by a litigation by anyone in a fairly litigious society, then the LLC is attacked with little hope of attacking assets outside the LLC. Although it appears the LLC veil can be pierced if your negligence is particularly poor.
There appears to be little to no taxation benefits if you are the sole person attached to that LLC. There are more benefits if there are other members on lower incomes but then there are added costs and more complex taxation issues to overcome.
As far as I can see, litigation is the major reason to setup an LLC to protect your other assets.
Here's my issues.
If I go up to a brand new car yard salesman with my 3 year old car and ask him if he thinks I need a brand new car, I'm pretty confident of his response. "Of course you do".
And there's going to be some very good reasons why this is a fantastic idea.
1. The latest model has extra air bags. You want the latest safety features for your family, right?
2. This model has GPS and a DVD player.
3. This model has 2 extra speakers for better sound quaility
4. This model now has a rear view camera for safety
etc etc
But do you really need a new car????
They want your business.
They want your cash.
It's the same with property attorneys. It would be very bad business practice to tell you that an LLC is a waste of money and you should spend it elsewhere.
ISSUES:
– They cost you money to setup.
– There are ongoing costs with an LLC
– More costs if you buy another USA property in another state because you have to register that LLC in that state.
– If you buy a 2nd US property, do you setup a new LLC for that property to protect it from the first property or pour it into the original LLC? Thus exposing both properties to litigation effects.
To make matters more complex: everyones situation is different and everyones risk profile is different.
The way I currently see it:
If you buy a USA property that has been rehabbed and,
You get a good property inspection completed before settlement and
Address all issues before tenants enter and
A good property manager onboard to address issues as they arrive promptly and
A home warranty insurance so repairs are carried out by a licenced builder with liability insurance and
Good quality landlord insurance with increased liability insurance.
A tenant will thus find it difficult to sue you for negligence because you have followed all the due processes.
In conclusion, I know an LLC setup is the best way to go, but if it costs you too much money to operate with ongoing costs and even then its not gauranteed to protect you……….
Just my thoughts.
