I often hear newer real estate investors being told that they shouldn’t hold properties in their own name or even that every single property they own should be held in its own entity—and this advice isn’t without merit. Want more articles like this? Create an account today to get BiggerPocket's best blog articles delivered to your inbox Sign up for free The two primary reasons for owning properties inside an entity are 1) for asset protection in the case of entities like LLCs and 2) for anonymity for entities like trusts. Despite what you may have heard, trusts by themselves don’t provide much asset protection, other than making the pursuit of one’s assets a little more difficult. That said, other considerations could make you lean the other way (towards postponing entity setup). For example, it may be more difficult to obtain financing inside some of these structures. There can also be tax implications, such as transfer tax. In fact, Pennsylvania charges a transfer tax any time you change the titling of the asset. Transferring assets to an entity can also trigger the due on sale clause of the mortgage. When it comes to when and how to hold property, the arguments can be endless, but the real question for me in the beginning was which master am I trying to serve? In other words, what’s most important to me? Is it tax and estate planning, financing, asset protection, or something else? Maybe You Shouldn’t Start an Entity Of course, I’m not giving accounting or legal advice, as I am neither a CPA nor an attorney. What I’m alluding to is that maybe, just maybe, there are some strategic reasons not to start an entity just yet. This may sound strange coming from someone who has 20+ entities at any given time. And trust me, I have the tax returns and legal and accounting bills to prove it. So, my question is not whether you should set up an entity but rather when you should. This decision is a very personal one. Related: The Pros & Cons of Using a New LLC for Every Property Purchase In a perfect world, we would all have an entity for almost anything we did, so long as things like tax and estate planning (even legacy) strategies didn’t get in the way. That said, it can be difficult to look that far ahead and think of all the potential issues, especially when you’re just starting out. So, I’ll reference my approach, which I’ll say isn’t for everyone, and you can decide if it makes sense for you. I was a blue-collar guy trying to build wealth, so some of my ideas may not be as relevant to a high-income earner or someone who already has some significant assets or businesses to protect. Real Estate is a Finance-Driven Business As a real estate agent, I knew a little bit about financing in regard to residential and commercial real estate investing, and to be quite honest, their differences dictated a lot of why I did what I did. At first, many of us are just venturing into real state, so we’re not even sure this is something we really want to do. Let’s face it, investing in hard real estate and dealing with tenants or property issues is not for everyone. When I was just starting out, though, investing in hard real estate made perfect sense since I had worked in construction while going through college, owned my own painting company, and later even became a property manager. Real estate was absolutely my thing. Plus, since self-employed contractors and real estate agents usually don’t have any real retirement, I was hoping my retirement was going to be my paid-off rentals. Once I decided I wanted to build a real estate portfolio, the strategy and plans followed. Personally, my goal was to get as many properties in mine and my wife’s name as quickly as possible, with the best rates and terms, before going to commercial financing, so our tenants’ payments and real estate tax write-offs could help us build significant wealth that much faster. Related: Accounting Practices for LLCs: What Every Real Estate Investor Should Know With that goal in mind, I decided to postpone setting up an entity, and looking back, I believe that my portfolio would’ve grown much slower if I had gone down the LLC/trust path right away. After all, commercial financing typically requires a higher down payment and more insurance, and it usually has higher interest rates over a shorter term (i.e. 5-20 years, although it may be amortized over a longer period of time, as opposed to 15-40 years with residential). Since growth was my main goal, I knew I had to find other ways to protect my assets. For me, these four strategies went a long way towards limiting my risks before starting my first LLC to hold real estate. 4 Alternative Asset Protection Strategies Use debt as asset protection. This strategy involves keeping properties in my own name but making sure they’re fully encumbered by mortgages (including HELOCs). That way, there’s little to no equity to go after. Increase the liability coverage on your landlord policies. It’s much easier for collection attorneys to go after policies than actual assets. Take out additional insurance coverage with an umbrella policy. This additional liability coverage can be beneficial in a lawsuit that exceeds your current liability coverage. Know the titling advantages and/or disadvantages in your state. For example, I’m from the state of Pennsylvania, where if you take title to a residential property through “Tenants by the Entirety,” jointly with a spouse, creditors pursuing one spouse cannot force the sale of the property. Which Master Are Your Serving Right Now? There are many situations that could dictate changes in your strategies in the future. Some advisors will tell you to have some of your personal property in your name and some in your spouse’s name for estate tax purposes, but this can vary as well, depending on the size of your state. Again, it’s back to which master are you trying to serve? My strategies may have been a little unorthodox, but I believe I was able to build a stronger portfolio more quickly by treating properties in our personal names as just a separate bucket of assets, while still building several other buckets, all with varying degrees of exposure to risk. Even today, I still employ this strategy and still own a few properties in my own name, although as I pay some off, I move them to a trust and LLC structure since they’re now owned free and clear. So, I’m interested to hear from the BP audience: How do you feel about owning some real estate in your own name? Have you ever used one of the strategies listed above in lieu of setting up an entity right away? Please share your thoughts or strategies below.