You were informed that the smart way to build a secondary income is to invest in rental property. Now, you have made the decision to start investing in rental property, but you are confused about where to start. Smart rental investors seek advice from a business attorney prior to investing in rental property.
How can a Business Attorney Help with my Rental Property Business?
Investing in rental property is a business pursuit. Like other businesses, your first concern should be asset protection. A business attorney can advise you on the possible risks and how to mitigate those risks. Some areas of concern would be business formation, insurance, taxes, and financing.
A popular business entity for rental property is the LLC. The LLC offers many attractive features for rental property investors because of the relaxed formalities, limited personal exposure, tax options, and flexible profit distribution. You may need one or more LLCs or the LLC may not be right for your situation, so be sure to contact a business attorney to discuss details about your rental property investment situation.
Insurance is usually a requirement when renting property and there are several options to consider when deciding on insurance. It is better to be over-insured than underinsured, but there may be certain scenarios where the insurance does not cover the potential loss. The business attorney can draft or review your rental agreement to identify where there may be exposure or to mitigate exposure, which can help with insurance purposes.
A serious area that prospective rental investors fail to acknowledge is the potential tax burden of the new rental property. In most cases, The Internal Revenue Service (IRS) expects rental property investors to report rental income. The LLC has options that address tax obligations. However, it is important that you have an attorney and certified public accountant (CPA) to discuss your tax obligations for the new rental property investment.
Do not start applying for financing until you understand your financing options. It is usually best to seek financing with your business structure in place. Talk to your business attorney about financing your rental property as a business entity.
Investing in rental property has many consequences if you are uninformed. Rental property laws also vary by state, county and city, so it is best to know your responsibilities as a landlord. For example, North Carolina rental property law is the North Carolina General Statute Chapter 42 Landlord Tenant Law and the city of Charlotte has its Minimum Housing Code with even tougher laws.
We Can Help
Investing in rental property can be a profitable pursuit if approached with strategy and smart decisions. If your new rental property investing business needs assistance, our experienced team can help. Call (704) 230-0466 or CLICK HERE to schedule a meeting with a business attorney who can help. The Brewington Law Firm, PLLC meets by telephone conference, in office or web conference (Zoom/Google Duo/Microsoft Teams).