When do I need to set up an LLC?

There are several reasons to set up a business entity as a real estate investor, the largest being for the incredible tax benefit, the third for asset protection, and the third for liability protection, but at what point is it truly necessary? To answer that question we can look at the typical chronological order of progression and see that having a name to put on business cards and attached to an answering machine and perhaps an email address is preferable, but it is possible to work around if necessary without any significant drawbacks. The real urgency comes when you start to draft offers. In order to receive the tax benefit, you need to make money in the name of the business, and in order to do that you have to draft the offer and assignment or BC contract in the name of the business so you can get paid that way.
Not only does this allow you to write off on your taxes far more than you would have been able to otherwise, but it also protects you in case someone ever tries to come after you.
Best scenario is to just get it set up as soon as possible and be done with it, but for those on a tight budget or in California where it is $850, it may make sense to eat the taxes on the first deal and just close their personal name, but definitely should be done immediately after the first closing at the very latest.

Cheers,

Dave PMI Coach