Author Topic: Building an ADU to rent, do I need to set up an LLC?  (Read 1759 times)

Frugal D

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Building an ADU to rent, do I need to set up an LLC?
« on: April 10, 2016, 01:16:07 PM »
How are the other landlords dealing with this? Do you need an LLC to collect the rent for liability purposes?

This will just be for an ADU in my backyard.

bacchi

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Re: Building an ADU to rent, do I need to set up an LLC?
« Reply #1 on: April 10, 2016, 03:24:22 PM »
How would you handle the ownership? You'd own the lot and the ADU so the LLC would just manage it? Or would the LLC build the ADU on your lot?

It sounds like an easy structure to pierce.


Eta: I'm always just rented out the ADU in my own name. For the new ADU, we'll be living in it and renting out the main house.
« Last Edit: April 10, 2016, 03:26:09 PM by bacchi »

redbirdfan

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Re: Building an ADU to rent, do I need to set up an LLC?
« Reply #2 on: April 11, 2016, 11:26:01 PM »
I would just keep the ADU in your own name and up the liability insurance under your homeowner's policy. If necessary you can get an umbrella policy.  If it's strictly a one-unit residential ADU, you would probably be fine with liability limits of 100k, 250k or 500k depending on your location.  Setting up a LLC is probably more trouble than it's worth if your ADU will only accommodate one person or a couple.  You could also run into some issues if you are financing the ADU under your LLC on land owned in your name.   

clarkfan1979

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Re: Building an ADU to rent, do I need to set up an LLC?
« Reply #3 on: April 14, 2016, 04:47:31 PM »
I would just keep the ADU in your own name and up the liability insurance under your homeowner's policy. If necessary you can get an umbrella policy.  If it's strictly a one-unit residential ADU, you would probably be fine with liability limits of 100k, 250k or 500k depending on your location.  Setting up a LLC is probably more trouble than it's worth if your ADU will only accommodate one person or a couple.  You could also run into some issues if you are financing the ADU under your LLC on land owned in your name.   

+1

Gr8ful

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Re: Building an ADU to rent, do I need to set up an LLC?
« Reply #4 on: April 25, 2016, 10:28:12 AM »
Increase your umbrella policy.

As said above the LLC will be too easy to pierce.

KMB

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Re: Building an ADU to rent, do I need to set up an LLC?
« Reply #5 on: April 25, 2016, 12:40:43 PM »
Do not put your property in an LLC if you live there. You will lose owner occupied status and potentially pay much higher property tax.

Also, do your homework on building one of these. Many municipalities have outrageous regulations. Minneapolis, I believe, allows owners to build them, but they must be torn down before you sell your property IIRC. It would be wise to read your entire zoning code once more, just to be sure. Zoning codes are notorious for hiding important regulations in non-intuitive locations.