The motivation of potential investors to protect their hard-earned investments is completely understandable. There’s just one problem. Generally, new investors don’t have investments to protect. There’s that, and there’s the fact that new investors are more likely to have less capital for investing in real estate, so it becomes an unsolvable problem: “I can’t invest in real estate without an LLC” and “I can’t get financing because I have an LLC.”
If the LLC is the cause of both problems, remove the LLC.
As CBG president Ben Rao put it, “New investors focus on the LLC because they’re ‘nervous Nellies.’ The investors who want to do a deal will do a deal.”
As a parting thought, running your real estate business like a business doesn’t require a business entity. For evidence of this, check out IRS 1040 schedule E. If you run your real estate business according to the letter and spirit of the law, combined with an umbrella policy for general liability insurance, you’ll have the same foothold other real estate investors have had before you.
This blog is not legal counsel, but something every new real estate investor should take under serious consideration. Will an umbrella policy for general liability insurance suffice? Only you have the definitive answer to that question