Buying Property in NYC Through an LLC

What are the pros and cons of buying property in NYC through an LLC? Below, we’ll cover the good, the bad, and the ugly. We’ll answer the most frequently asked questions and share what you need to know before you submit an offer.

Why should investors consider buying property in NYC?

New York City is widely known to be the world’s preeminent real estate market and remains the favorite destination for investors worldwide as a safe haven asset. It’s the world’s freest, most cosmopolitan, and safest megalopolis — easily the most suitable for property investment.

Moreover, the real estate market in New York City is among the world’s most transparent, especially when it comes to apartment re-sales. Recorded sale prices and the names of the buyers and sellers are publicly available through systems such as ACRIS to the general public, as well as easy-to-use real estate consumer search websites such as StreetEasy, Brownstoner, or Realtor.com. 

Is buying property in NYC through an LLC a good idea?

It depends on what your objectives are. Here are some situations where an LLC would make sense:

  • You’re a celebrity or billionaire concerned about personal privacy. An LLC will ensure reporters can’t find your home and the price you paid in online public records.
  • You’re an investor with a large portfolio of other assets, which can be shielded from liability through an LLC. 

Note: It may be simpler and cheaper to simply buy rental properties in your name and to purchase a personal umbrella insurance policy to cover against lawsuit claims in excess of what a traditional home owner’s insurance policy covers.

What are some drawbacks to buying property in NYC through an LLC?

The biggest drawbacks will be higher upfront and running costs:

Set-up costs – You’ll spend up to several thousand dollars to set up the LLC, a registered agent, fulfill publication requirements, and optionally, to hire a lawyer.

Running costs – You will have higher running costs from owning your property through an LLC, even as a single member. These can include registered agents, accounting fees, K-1’s to partners, recurring state fees, Unincorporated Business Tax, and more.

Opportunity costs – buying through an LLC means you’ll have to forgo the popular cooperative and condominium tax abatement which decreases property tax bills by 17.5% or more. Furthermore, you might have issues in obtaining financing from some lenders.

What are the steps to buying property in NYC through an LLC?

The search, offer submission, negotiation, and closing process will be identical to the steps to buying a condo in NYC except for a few additional steps you’ll need to take to set up the LLC.

Do I need to reveal my name when buying property in NYC through an  LLC?

You do not need to reveal your name if you are purchasing all cash and can show proof of funds. Your buyer’s agent will simply state that the name of the buyer is the LLC. Since you will be showing proof of funds, be sure the bank account matches. Alternatively, you can deposit the funds into your lawyer’s escrow and share a beneficiary statement. 

Note: As of this writing, LLC property purchases above $3 million in Manhattan and $1.5 million in Brooklyn are subject to additional scrutiny by title companies to determine the identity of the owners. 

How do I set up an LLC to buy property in NYC?

It can actually be quite affordable to form an LLC in the state of New York. Though much commotion is made about the cost of fulfilling the publication requirement in New York County (i.e. Manhattan), there is no requirement that you must file in a specific county. 

You should get started by reading the Department of State’s guide to forming an LLC. From there, you can easily file online in under 10 minutes for a nominal fee of $200, payable by credit card. 

Note: You’ll want to choose to online file “Articles of Organization for a Domestic Limited Liability Company (not for professional service limited liability companies)” 

You’ll want to be careful about putting your personal information anywhere on this form as it will be released in public databases. Many filers utilize a registered agent’s information — an expense that can be as little as $50 per year.

Do I need an operating agreement when buying property through an LLC in NYC?

You do not need an operating agreement if you are the sole owner of an LLC. In this case, you’ll be classified as a single-member LLC by the IRS and disregarded for tax purposes. 

You will need an operating agreement if you have partners in the LLC. This isn’t required by the government, but it outlines the relationship and ownership between partners.

Should I have someone else be the filer?

If you want maximum privacy, you can have a friend, lawyer, or other unrelated person be the filer when you file the Articles of Organization. If you do this, there will be no trace of your information online.

You will need to have the filer sign an Initial Resolution of the LLC stating that they are relinquishing all rights and ownership of the LLC to you, especially if you want to start a bank account for the LLC.

Note: Keep in mind this does not mean you can hide your ownership from the IRS or from your bank. You will be mailed a form from the IRS after you file asking you for the contact information and social security numbers of all members of the LLC. 

Why are the Publication Requirements of an LLC so expensive?

The publication requirements for the formation of an LLC are an anachronism from an earlier era where the only form of public communication was through newspapers. Therefore, it may have made sense to tell the public about the formation of a new LLC through local newspapers. 

As you can see, the process is filled with ups and downs. We hope this guide helped you to understand whether or not buying through an LLC is right for you, and we’d love to answer any other questions you may have. Reach out at any time to get the conversation started!

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