What is the best legal entity for buying rental real estate? Today's video will discuss this topic. - Hi there, I'm Clayton Morris, founder of Morris Invest and a long-time real estate investor. - One aspect of real estate investment that we don't often talk about is how to structure your business in order to protect yourself legally. - For example, if a tenant were to have an accident on one of your rental properties and your property is in your own name, you could be held personally liable for any damages. - It is crucial to have a legal entity in place to protect your personal assets from being vulnerable in such situations. - So, is there a better legal entity for owning real estate? The answer varies and it's best to consult with a lawyer and an accounting team. - Regardless of the legal structure, having liability insurance for your rental properties is always necessary. - There are different types of legal entities for owning real estate, such as limited liability corporations (LLC), sole proprietorships, C-corps, and S-corps. - Personally, we use an LLC for our rental properties as it limits our overall liability. - High-level accountants and lawyers often recommend owning rental properties within an LLC. - Their advice is to consider setting up multiple LLCs if the value of the properties exceeds a certain threshold. For example, if the total value of three rental properties is $150,000, it is advisable to set up another LLC. - We usually name our LLC after the purpose, such as "Camera Happy LLC," and set up separate LLCs for properties in different states. - Canadian investors buying property in the US may find that an LLC does not offer them the same level of protection as a C-corp would, so they set up a C-corp instead. - It is important to discuss your...
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