With the market on a relentless rise, investors have been pounding the pavement looking for the next deal. However, often in the race to find the best deal, investors lose sight of focusing on important issues. Whether you are a seasoned investor or a beginner, it is imperative that you give strong consideration into how you will hold your investment property.
Depending on the circumstances, whether it is a single-family home or an apartment complex, most investors choose to hold their rental property through the use of a limited liability company or «LLC.» These entities are ideal for holding real estate in Arizona as they are generally inexpensive and quick to form and maintain.
In Arizona, holding rental property in an LLC can be beneficial for many reasons. First and foremost, the greatest advantage to holding property in an LLC is that it shields its members from personal liability. Thus, should the investment incur a debt, the only thing at risk in an LLC is the investment itself, and not the personal assets of a member.
Another great benefit of the LLC is that profits and losses flow through to the members. LLC’s are generally easier to operate than corporations because no annual reports or strict statutory procedures need to be followed. Time-consuming formalities inherent to the corporate structure such as holding and recording corporate meetings of shareholders and directors simply do not exist in the LLC structure.
Additionally, an LLC can be very flexible in the way it is structured. This flexibility allows an entity to be structured to meet the needs of many different situations. An LLC can have more centralized and formalized management as in a manager managed LLC, or it can be less centralized by having management duties shared among the members.
Finally, it provides a layer of professionalism that other investors won’t have. That said, establishing a real estate LLC is an important step for investors to not only achieve success but ensure they’re protected as well.
Are you ready to form your LLC? Our good friends at Phocus Law are aligned with AZREIA’s mission to further our members ability to successfully invest in real estate. Phocus Law has created an LLC offer for us. Their current rate is $649 for a single member or married member LLC with an operating agreement. For AZREIA members only it is now $385. In order to take advantage of this offer head over to AZREIA.org/LLC.
Michael Del Prete, Executive Director