Business Management

House Hackers: Here’s Why You Shouldn’t Use an LLC for Rental Property

Expertise: Real Estate Investing Basics, Real Estate Deal Analysis & Advice, Mortgages & Creative Financing, Landlording & Rental Properties, Business Management, Personal Development, Flipping Houses, Commercial Real Estate
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LLCs are a hot topic with new investors. If you've been investing for a while, you probably invest with an LLC. But is an LLC (or "limited liability company") worth it for a new investor?

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Maybe you haven’t done a deal yet, and you’re about to do one. Should you be using an LLC for rental property?

Or maybe you have a few deals already. Then, the question might be when should you start your LLC?

This article will address when to start an LLC and if it’s even worth it at all.

Out of the gate, it's important to note that an LLC is not a one-size-fits-all approach. If your goal is to build net worth into the hundreds of thousands or millions of dollars, then set up the LLC. If you plan to keep your portfolio small (or are house hacking), an LLC may not be right for you.

Related: Do Landlords Need an LLC for Real Estate?

LLC written in blue marker on a spiral notebook laying on desk with small potted plant and other desk decor

Why You Should Skip the LLC When You’re House Hacking

Don't use an LLC when house hacking, because it may prevent you from getting the financing you want. For instance, low-money-down, Fannie Mae, or FHA-backed mortgages can't be held under an LLC. As a first-time home buyer, you're able to put down as little 3.5 percent with an FHA loan. But this type of loan is available only to people purchasing primary residences under your personal name.

The same bank that would allow you to purchase a property for just five percent down may require 20 percent down for you to buy using your LLC. Plus, you might be able to get lower interest rates when purchasing a property as yourself, not an LLC.

That’s why you want to think about the type of investing you want to do before starting an LLC.

Special tax breaks

Interest on a mortgage for a primary residence is tax-deductible on your personal income. And if you opted for an FHA loan with a low down payment, your mortgage insurance is also tax-deductible.

You might not be able to claim either of these tax breaks on your personal tax return were you to move the property into an LLC. These tax breaks are especially important to highly leveraged owner-occupiers—like house-hackers—who pay lots of interest and mortgage insurance each month in the first few years of ownership. Even in pass-through entities, like single-member LLCs, these tax breaks are minimized because investors can't leverage as much. Putting down 5 percent or less through an LLC is a rare feat.

Tax-free capital gains

Assuming that you live in the property for at least two years—and assuming that the property appreciates over that timeframe—you can sell your investment for a tax-free capital gain. This gain caps at $250,000 for a single person and is limited to primary residences only. Unlike a 1031 exchange, the money is truly tax-free and can be spent on your next vacation, manicure, or other non-real estate assets.

Assuming that my property appreciates 10 percent over the next two years, I’m looking at a cool $20,000, instead of perhaps $13,000 after taxes. That’s a meaningful difference to me.

Mixing business and personal

Of course, a good real estate investor runs their property as professionally as they can, with separate email addresses, bank accounts, and credit cards for property-related expenses. But because this is your house, at the end of the day, you have the option to cheat when necessary by mixing personal and business assets. I have no corporate veil to defend, and thus have more flexibility in moving assets around, managing tenants, doing work on the property, etc.

Reasons to Use an LLC

But not all investors house hack—and even if you are opting for this method, you may prefer the veil of an LLC. There are a number of good reasons to elect for an LLC.

Related: How Does an LLC Owner Get Paid?

Protection from liabilities

LLCs protect you from liability claims. For anything that’s a claim against a property—like, “Hey, I slipped and fell!”—an LLC is an entity that can stand between you and that. Whoever makes the claim will come after the LLC, not you personally.

Full transparency: There are ways around this. The most important one to mention is liability insurance. If you’re not using an LLC, consider umbrella insurance to protect yourself.

It makes sense to want to distance yourself from your properties for liability reasons. But for many first-time investors who are owner-occupiers or owner-managers, this advantage is likely forfeited from day one. Your tenants will see if you put the work in or not: getting that leak fixed, mowing the lawn, installing that new carbon monoxide detector, etc. Your presence on-site may expose you to legal risk regardless of your LLC status.

Tax write-offs

Because it’s an entity with its own tax return, LLCs allow you to write things off (e.g., business-related expenses like your cell phone bill). You can try to write them off on your personal tax return, but it looks a little suspect to the IRS that a person, not a company, is claiming business expenses. It makes things cleaner from a financing and tax perspective to write them off under an LLC.

If you don’t plan to use an LLC, do whatever you can to keep your investments separate from your personal account. Use a separate email, get a credit card only for business expenses, and have a separate account for your real estate investments.

Selling company shares

An LLC operates as a business entity. As long as it’s registered properly with the SEC, you can sell shares—or in the instance of LLCs, what’s called “interests”—of the company to other investors who want to invest with you. Or you can sell the LLC altogether as a business that owns things.

Related: 9 Steps to Take BEFORE Setting Up a Real Estate Investing Business Entity

More LLC Pro Tips

Here are a few final thoughts on the topic.

Avoid setting up your LLC online (unless you’ve been doing it for a while). Instead, have a lawyer help you.

Also, have a lawyer help you create an operating agreement with the LLC. You can do this online, too, but strongly consider NOT going that route—especially if you have partners. A good lawyer can set up an operating agreement for you for less than $1,000. It’s worth it.

Bottom line, if you’re going to build a business around real estate investing, run it as a business. An LLC is a company. If you’re looking to make this a side hustle or just something you do a little bit, then do it in your personal name and own one or two properties—that’s OK.

But if in the future you intend to build a big portfolio, set up an LLC. Operate as a business. Do it now—five years before you get to that point. Moving properties out of your personal name and into an LLC is not easy. It’s doable but difficult.

Where should I set up my LLC?

One last thing: set up the LLC where the property is. Don’t favor Nevada or some other state simply because of favorable tax policies. The LLCs owning certain properties should be set up in the state the property physically exists in. You’re going to have to pay a tax return in that state. So just set it up there.

The reason people talk about state-based LLCs is because they believe specific types of LLCs will prevent certain claims from jumping over the LLC and getting to you personally. However, it’s unlikely that an LLC will prevent anyone from getting a hold of a person specifically if that’s what they’re trying to do. Plus, that’s what insurance is for. Avoid the tax headache of setting up an LLC outside of the state the property is actually in.

Please consult a lawyer or CPA about this subject. A lot of the information in this article is the opinion of BiggerPockets, so it’s important to consult a professional.

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What do you think about LLCs? Do you favor a certain state over others? 

Leave a comment below!

Matt Faircloth, co-founder and president of the DeRosa Group, is a seasoned real estate investor. The DeRosa Group, based in historic Trenton, New Jersey, i...
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    Dave Mays Investor from Madison, Wisconsin
    Replied about 1 year ago
    Matt, I’ve heard both side of the argument of establishing an LLC for each property. In your opinion, if I have a small portfolio of 6 properties, should each have their own LLC?
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    Hey Dave! This is a very common question, and there are different schools of thought. I don't see the benefit of an LLC per property as long as the ownership structure is the same. If you have a good insurance policy, you can be protected against liability claims, and not need to compartmentalize the assets into their own LLC.
    Adrien S. Flipper/Rehabber from Highland, IN
    Replied 3 months ago
    Not a CPA or attorney but giving own opinion (based on conversations I've had with those fields and people smarter than me). Having a separate LLC per house is overkill. Each LLC needs separate bank accounts, separate tax filings, and you'll go crazy trying to keep everything separate. After convos with dozens of attorneys and CPAs, I've decided to keep up to $1M of assets in each LLC for rentals. My property insurance has a solid liability coverage and I wrap that with an umbrella policy of $2M. For me, $1M in assets is 8-12 houses. It may change from state to state but have fun doing separate LLCs per property if you opt to go that route.
    Derik Lewis
    Replied about 1 year ago
    Sorry, didn’t see your comment while I was watching the video and adding my comment … same question here!
    Derik Lewis
    Replied about 1 year ago
    Great information! What are your thoughts on putting each property owned into a separate LLC? In California, it becomes a problem becuase of the $800 minimal annual tax on each LCC, but if we could do some type of DE series LLC (and register it in CA), it might be possible to avoid that tax while keeping liability separate for each property. Just curious on your opinion. Thanks!
    Dave Rav from Summerville, SC
    Replied about 1 year ago
    @Derik Lewis – I wonder if you established the LLC in another state? Maybe Delaware or Nevada – they are tax and biz friendly. You may not necessarily need to form the company in your home state..
    Jon Cunningham
    Replied about 1 year ago
    LLC members will have to follow the tax requirements of the state(s) where the PROPERTIES are located regardless of where the LLC is formed. Typically, unless you need anonymity, an out of state LLC just adds cost and complexity with little or no upside.
    Jon Cunningham
    Replied about 1 year ago
    Completely agree. And you need the insurance anyway, while the LLC will protect your personal assets the assets inside the LLC could be wiped out by a large uninsured claim within the LLC. Also, LLC members will have to follow the tax requirements of the state(s) where the PROPERTIES are located regardless of where the LLC is formed. Typically, unless you need anonymity, an out of state LLC just adds cost and complexity with little or no upside.
    Leonard Smith
    Replied about 1 year ago
    Hi Derik, Unfortunately, CA will charge the $800 minimum tax regardless if your LLC is based in CA or not! As long as you have a LLC that operates in CA, you have to pay the tax. Hope this helps!
    Brian Levredge Investor from Chattanooga, Tennessee
    Replied about 1 year ago
    You’ll probably want to skip the series llc. I had initially set up two series llc’s for different entities and quickly came to the realization they weren’t needed and were in fact costing me money. I was required to set up bank accounts for each series, which had it’s own EIN per series as well. In the end the compliance costs far outweigh the benefits, imo. Btw, the reason people do DE, NV, and a couple other states is also because some of those states don’t treat them as community property for marriage purposes and they have additional layers that makes getting to the assets that much more difficult. Probably not necessary for 95% of the people here but a distinction nonetheless.
    Dave Rav from Summerville, SC
    Replied about 1 year ago
    @Brian Levredge I completely agree with you. Vast majority of folks don’t need some of these things. Especially newbies. Sophistication may just end up complicating your business and cost you money, when in the end it’s overkill. If your portfolio is small or lacks complexity, a degree of simplicity likely is appropriate. If you only own say two properties, then 1 LLC and a liability policy likely is good enough. There is no way to fully mitigate 100% of the risks out there.
    Jared Friedman Investor from Studio City, California
    Replied about 1 year ago
    Insurance is always your first and best defense against a lawsuit. An umbrella policy for several million is cheap and a must for all real estate investors. This is what will protect you from slip and fall and all Peronal liability. I have yet to hear of a single example where an LLC saved someone from a major lawsuit when that person had sufficient insurance. Also- regarding taxes it makes zero difference if you have an LLC or not. You get to write off everything the same way. They are both “clean”. LLCs have their place but they create a false sense of security. I’d rather spend my money on a crapload of insurance so if and when you have a lawsuit the insurance company will send out their army of lawyers on my behalf.
    Chuck Win Investor from Dundee, Illinois
    Replied 3 months ago
    I own 4 rentals in Indiana and I have gone back and forth for 10 years, Should I create an LLC , 4 separate, 1 LLC for all. Is really Worth it. Tax breaks are the same. Even Indiana charges $500 franchise and $250 annually and $100 tax for each LLC. loads of paperwork ,Fees, separate bank accounts. For Now its $1 million for each with $1 Umbrela very cheap, I could see having an LLC if you have multiple Apartments with more than 1 level with Multiple tenants that if there was a fire or another type of liable accident.
    Adrien S. Flipper/Rehabber from Highland, IN
    Replied 3 months ago
    I'm in Indiana and I don't pay $250 annually and $100 tax per LLC. My taxes are significantly higher because my LLCs make money but I have a few LLCs that did nothing this year and didn't pay that $100. Maybe you should talk with a new CPA?
    Chuck Win Investor from Dundee, Illinois
    Replied 3 months ago
    Also I have read so many articles, Post, You tube , and this Site “ Bigger Pockets “ and cannot get a straight answer, Sorry no disrespect to some of you folks, LLC will don't always protect personal Assets, And if you are a slum lord , no disrespect just figure of speech , than you deserve to be Sued .
    Joseph M. Investor from Boulder, CO
    Replied 3 months ago
    If you can't get real estate professional status and you make over the threshold to right off up to $25K on passive investment activities, would an LLC mitigate that. I mean, at the end of the day it may only net $7-8K, so not sure it is worth it for 4 properties.
    Jon Cunningham
    Replied about 1 year ago
    Completely agree. And you need the insurance anyway, while the LLC will protect your personal assets the assets inside the LLC could be wiped out by a large uninsured claim within the LLC.
    Michael Klugmann
    Replied about 1 year ago
    You cannot sell “shares” of an LLC. You’d have to have an incorporation to sell shares in the traditional sense. LLCs are based on percentage ownership and not comprised of shares. This is true for both single member and multiple member LLCs.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    Yes, you are correct, selling shares is for corporations but the concept of selling a portion of the LLC to investors to raise capital is what I was conveying in the article. Thanks for the clarification!
    Dave Rav from Summerville, SC
    Replied about 1 year ago
    Good post. I believe LLCs, or establishment of some type of entity is important. There are many others that may prove helpful too (S-corp, LLP, etc). Forming an LLC online is actually doable. I do not believe you need to consult an attorney (unless you have multiple partners and a complex structure); you just need to know what you’re doing. Research the topic. I actually took a corporate law class during my undergrad studies, which prepared me (years later – who knew!!). I’ve formed two LLCs in my home state of SC – no problem. Cost was 1/8th that of attorney. However, if you are looking at 3+ partners, with unequal responsibilities, a silent partner, or other complexity I highly recommend consulting an attorney.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    Thanks for your thoughts Dave!
    Tarun Patel from Lansdale, PA
    Replied about 1 year ago
    For small multi family (1-4 unit) I’ve heard setting up an LLC prevents you from obtaining the better residential financing rates (you have to pursue commercial financing). Is this true? Thanks
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    This is a great convo, let me offer my 2 cents. There are low money down programs for homeowners that can be used for 1 to 4 family IF, and I underline IF again, you are going to live in the property. This is called a House Hack, and BP has a great book on the topic by Craig Cruelop. You must take title to the property in your own name though, not in the LLC so you do loose that low money down program IF you buy the property in an LLC. The way around that, which was pointed out above, is to buy in your own name, quitclaim deed it to your LLC, but you also need to do the last step which is to Refinance the property in the LLC. That alleviates the potential due on sale clause that could come up from moving the ownership from you to your LLC in the future. You would only do this if you bought it as a primary residence, then moved out and wanted to hold it as a rental long term. Moving to the LLC would give you that extra layer of liability protection and it would also take the mortgage off your credit report, increasing your Debt to Income ratio and making it easier to get a loan on another residence.
    Anthony Morrow Rental Property Investor from Concord, CA
    Replied about 2 months ago
    One question and a comment, "You would only do this if you bought it as a primary residence, then moved out and wanted to hold it as a rental long term.", when can I move out? 1 year? 2 years?? Also, I had to create a one member LLC for my self directed IRA account and I have check book control to buy and sell within this account.
    Adrien S. Flipper/Rehabber from Highland, IN
    Replied 3 months ago
    I don't know many normal lenders who do a residential loan to an LLC so if you buy a smaller property in an LLC, you'll have to get commercial financing. Unless, you do as Tal mentioned, you QC it from yourself to your LLC after the financing part. But when you Qc the property to your LLC, your title insurance is void so you're bringing in new risks associated with that.
    Tal Morgenstern from Sydney, Australia
    Replied about 1 year ago
    It would greatly depend on your personal circumstances but an alternative would be a quit-claim deed by which you close the property under your name and mmediately is transferred onto the LLC's
    A McElroy Flipper/Rehabber from Birmingham, AL
    Replied 8 months ago
    @Tal, I think a quit claim dees is good for declaring that you have no interest in any possible gain of the property but can still be held responsible for any liability. Just my experience.
    Mark Sandvig Real Estate Agent from Akron, OH
    Replied about 1 year ago
    Purchasing as a non-occupant (whether through an LLC or not) will yield inferior rates (usually .5-1% worse). Doesn’t matter if you’re in an LLC or not if you never plan to occupy. If you are house-hacking, you can always purchase it in your name and then drop it into an LLC later (via quit claim deed). This is how we are doing it.
    Andre Chambers Rental Property Investor from Saint Louis, MO
    Replied 8 months ago
    Title insurance may not follow when using a quit claim deed. A grant/ general warranty deed assures title insurance transfer. Several attorneys have verified this for me. Verify with your own people as well. Not horrible if a quit claim was used-just leaves open a risk that's easily removed by using a different deed transfer.
    Latte Apple
    Replied 8 months ago
    Thank you Andre. I am newbie. I could not quite a grasp the concept in your last sentence" "Not horrible if a quit claim was used-just leaves open a risk that's easily removed by using a different deed transfer". Would it be possible for you to rephrase or give an example. I was not sure in implications of what you are describing.
    Mike Conner from Tallahassee, Florida
    Replied about 1 year ago
    Tarun, Mark’s right that you will get inferior rates, but at least in my area all the commercial loans are amortized over 20 years as opposed to the residential that are 30 years. That will make quite a difference in your payment/cashflow.
    Tarun Patel from Lansdale, PA
    Replied about 1 year ago
    Thanks guys. In my area (outside Philadelphia, PA) I have been quoted rates of 4.375% amortized over 30 years for small multifamily (1-4 units) with 75% LTV. However, as you mentioned, commercial lending doesn’t typically provide the beneficial amortization terms (typically 20-25 years), and rates are higher (typically ~ 5% is what I have been seeing, both big banks and portfolio lenders). Higher rates obviously eats into your cashflow. As I have been looking at small MF properties in my area, I’ve been hence debating internally whether or not I should form an LLC when I do make my initial purchase knowing that at the end of the day cashflow might be affected. Maybe the best approach is to purchase as self proprietorship and obtain the liability insurance (umbrella policy) as suggested by others on this thread. Thoughts?
    Jeffrey Grieshop New to Real Estate from Coldwater, OH
    Replied about 1 year ago
    I am in the same boat. Read three posts down. I really started veering to “own in your own name” with the umbrella policy. My main reason is that forming the LLC will cost $ and I am yet to form one, it’s only holding me back. What Jon Cunningham said is assuring. I know it’s not the only time I have read about what he stated, that the tax benefits run the same either way(single member llc vs your own name).
    Wave Taylor from Baltimore, MD
    Replied about 1 year ago
    Great stuff here. Should you set up a separate LLC for each property?
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    I don't believe you do need to put each property into it's own LLC, this can become costly in setup and annual filing fees. You can achieve comfortable asset protection with a solid umbrella insurance policy.
    Jeff D. Real Estate Investor from Portland, Oregon
    Replied 8 months ago
    Yes. If you have several properties held in one LLC, there's several properties that are exposed if the LLC is pierced. If you have just one in that LLC, only one property is exposed.
    Drew Ander
    Replied about 1 year ago
    I am also curious about setting up a new LLC for each new property. I was advised from some really jerky laywer here in Cleveland to always set up a new LLC for every new property. He made it seem like if something happens, you can just ditch the LLC and not taint the business name. He also mentioned not tieing your personal name to the company name. So for me, don’t make it Anderson LLC but rather something random like “all homes are fixable LLC”
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    Hey Drew! I think that the attorney's recommendations are overly conservative. Also, if you "ditch" the LLC that owns the property if it gets sued, how do you continue to show that you own it, if that LLC is on title? Most attorneys will advise against the "worst case scenario" but getting sued for an amount of money above the coverage that your liability insurance policy is so unlikely that it's not worth considering.
    Jon Cunningham
    Replied about 1 year ago
    Really you will not get any additional business tax deductions by forming an LLC. In fact. unless the LLC has more than 1 owner it will be entirely disregarded for income tax purposes. A single member LLC and an individual tax payer will both report income using 1040 Schedule E (and state equivalents). If you do form an LLC you will most likely NOT be required to register with the SEC to take in additional investors. (There are many safe harbor exceptions to registration requirements). Most of my clients find it more efficient to start off owning real estate directly and form an LLC down the road when they add partners or equity investors. It is easy and typically a nontaxable event to move rentals into an LLC. However you should evaluate implications of your specific situation including possible property tax re-assessments, especially in California where such a transfer may cost you Prop 13 benefits. As the OP suggested, if you have any questions contact a CPA specializing in real estate. Most of us will gladly give a free consultation regarding your specific situation.
    Bryan Mills Attorney from Birmingham, AL
    Replied 3 months ago
    Thanks for posting this, someone needed to say it. I agree that benefits #2 and #3 were way off base.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    Thanks Bryan and Jon! I should have provided more clarity but I don't agree that the article was "off base". The article was intended for those looking to scale up their business. For getting started investors, LLC's may not be the first step on the ladder. I know many small operators that hold in their own name and file their business related deductions on their personal tax return. That said, any investor looking to scale up and run their real estate venture like an actual business will need to move over to an LLC. The LLC does allow them to bring on investors, and if they are bringing those investors as passive positions the absolutely MUST consider the SEC regulations. Yes, there are safe harbors for exemption but you still need to register your LLC as exempt with the SEC.
    Terry Lowe
    Replied about 1 year ago
    We have an LLC for each property in Colorado. That way, if someone gets hurt, they can only sue that one property. We also carry liability insurance for each property. Book keeping is more difficult, as you have to have an account for each property. Also you cannot mix funds between your properties. I advise a good attorney, because there are different laws in different states. Getting your LLC set up correctly is the only way it will protect you.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    Thanks Terry! Glad you chimed in as I have recommended that investors don't do an LLC per property. Glad to hear it's working for you and do agree that it provides an additional layer of security, whether it's necessary or not. Curious if you have to pay a filing or registration fee per LLC to the state? I've heard that can make an LLC per address cost prohibitive.
    LEONID ORLOV Investor from Hermosa Beach, California
    Replied about 1 year ago
    “LLC Provides Asset Protection” – only in theory .. If a tenant injury is caused by what is found to be “gross negligence”, corporate veil will be pierced and one will be responsible directly. Much better, and more reliable asset protection and a maximum liability limit your insurer allows and an Umbrella Insurance. Other negatives: double taxation. In CA you have to pay, I think $800.00 no matter if you lose or make money in your LLC. My 2c on the subject
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    Hey All, The insurance covers most safety items like slip and falls, incidental issues, etc... That said if the person suing or the insurance company can prove that you were made aware of a safety issue like a large buckle in the side walk, had asked that you repair it and you didn't, then the insurance company can deny coverage. Negligence occurs when you were made aware of an issue, given the opportunity to act, and didn't act. So if you are a good landlord and take action when issues are brought to your attention, the insurance policy will cover safety issues.
    Joanna Ling Real Estate Agent from Arcadia, California
    Replied about 1 year ago
    What is gross negligence? We purchased a commercial property under LLC which was rented to a fast food chain. Although it is a NNN, we still purchased a liability insurance. There were some findings in the inspection report that needs attention, I requested the tenant to correct them, but they just ignored it. If it actual cause any lawsuit from it, are we still liable to it or tenant is 100% responsible since I already inform the to correct them?
    Talisa Rafferty
    Replied about 1 year ago
    You are the owner. Safety violations fall on you.
    Terry Lowe
    Replied about 1 year ago
    I agree with gross negligence. We have a great property manager, but we are still active in making sure our properties are to code, and that there is nothing that could be considered gross negligence. I do not believe being a rental owner should be “passive”. Be involved!!
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    Agreed Terry! The property manager does not take the burden completely off the owner. You still need to take action when issues are brought to your attention and not defer everything. That's how negligence occurs.
    Edward Granville
    Replied about 1 year ago
    Hi I’m based in Curacao (Dutch Caribbean), And the dutch are smart about taxes. So here we pay an incremental tax percentage on owned capital. This might be true and handy for other countries too. Or other countries might change from a flat fee to an incremental fee in the future: In Curacao the thresholds are like this: 0,4 % up to $175k; 0,5 % between $175k and en $300k, and 0,6 % for $300k and higher. So here we try to maximise each holding LLC to about $175k. For $1.2M in real estate that would easily earn back all the administrative cost to separate and protect properties in their own LLC. There will also be a holding company for all the LLC daughters and a special daughter that does all the high risk stuff. Gains and losses can also be moved between daughters to minimise taxes.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    That's really interesting, thanks for sharing!
    Shama Lightwala
    Replied about 1 year ago
    Thanks for the LLC insights, Matt. I am new to the real estate investing world, and have just setup an LLC. I don't have any investments yet, but looking to make it a long term business (starting with research on auction buys in GA). This was helpful, thanks again!
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    Thanks Shama, best of luck!
    Jim Demartini Investor from Moorestown, New Jersey
    Replied about 1 year ago
    Matt, fellow NJ investor here. I have moved two properties from personal name to LLCs, and in both cases it was pretty easy and only a few hundred in legal and filing fees. These were in Burlington County though, which may be different from Mercer, where I believe you own properties. I (and my attorney, and my insurance agent) believe LLCs are worth it, in fact each property should be in its own LLC. You should also have enough insurance to cover all of your personal assets and you should let your insurer know about your rentals. In my case my umbrella rate went down when I put the rentals into LLCs. Your mileage may vary. But as in all business decisions, consult with your attorney and follow his/her counsel. They are the one who is going to help you should anything untoward happen at your rentals.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    Thanks Jim! Gotta love NJ these days!
    Reid Kane from Pittsburgh, PA
    Replied about 1 year ago
    Which is better and why: 1 property. C Corp with bearer shares, 1 shareholder, sell corp as an entity with the single property as its sole asset vs LLC
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    Hey Reid, Sorry but I'm not familiar with C Corps, but I have heard that the company pays tax and then the owners pay tax also, so there is double taxation and I don't believe you can pass through losses.
    Don Taylor New to Real Estate from Raleigh, NC
    Replied about 1 year ago
    I'll start off with getting my 1st property in my name, then set up an LLC for non FHA properties
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    Good luck Don!
    Costin I. Rental Property Investor from Round Rock, TX
    Replied 8 months ago
    Get input from an experienced attorney here like Scott Smith. Or consult with your attorney and follow his/her counsel. Look here for graphical representation to help you in the quest for answers: https://www.biggerpockets.com/files/user/CosIorg/file/asset-protection-decision-diagram https://www.biggerpockets.com/files/user/CosIorg/file/asset-protection-onion-diagram-v2
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    Scott Smith is the man! Great resource.
    Chris Gottshall Rental Property Investor from Portland, OR
    Replied 8 months ago
    I agree with this comment. I am working with Scott and his team for my situation and I feel like we have a great plan & have executed on 90% if it so far to get things set up for our handful of properties. I highly recommend them to talk through whatever your situation is.
    William Butler from mahopac, NY
    Replied 8 months ago
    hi Matt, great content. i am a realtor who works with investors and want to always be able to advise my clients the best way to protect their investments. i also hit the sub button on your youtube channel!
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    Thanks William!
    C. Osvaldo Gomez
    Replied 8 months ago
    What if your lenders don’t let you transfer title to an LLC? I’ve tried with two of my rentals and they wouldn’t allow since the new LLC didn’t have any credit history. I basically have to own the properties to be able to do that. Or refinance with a lender that does.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    Correct, you would need to find a lender that will fund the LLC, then do a quitclaim deed to transfer them to your LLC and then refinance it.
    Jeff D. Real Estate Investor from Portland, Oregon
    Replied 8 months ago
    Someone else already mentioned this, but it's really important to realize and think through. I'm not a lawyer, yada yada......but generally speaking.... Yes, owning your rental in an LLC protects you from potentially losing stuff you personally own in a crazy lawsuit. No, owning your rental in an LLC doesn't protect you from potentially losing THE RENTAL itself, or the INCOME off that rental in a crazy lawsuit. Its called a "charging order". So if you make cash flow off your property, and you lose in court, that cash flow could be awarded to the winner for years to come. The winner can be awarded a membership portion in your LLC. Your personal umbrella policy won't do anything for you. Having to share membership of my llc with the person that just sued me is not a road I want to ever go down. I would love it if any lawyers could chime in on this. Or property owners that lost in court. Because most threads about whether owning a rental in an LLC makes sense or not always seem to leave out this one minor detail.
    Nelly C.
    Replied 8 months ago
    what was it that the tenant sued for that not even the umbrella policy will do anything in this case? and having to share membership of the llc with the tenant (person who sued), it is catastrophic. than you so much for your input.
    Matthew L. Stevans from Pittsburgh, Pennsylvania
    Replied 8 months ago
    Everyone has made some great points and raised some very good questions. The first thing that you should do when starting a real estate investment is to hire an experienced real estate attorney and CPA. The money you spend will be an investment in your business, not a cost. Stop guessing and hoping what you read on the internet is correct. This blog is an excellent place to share ideas and experiences but you need to hire a professional to help you grow your business and protect yourself. It is really scary to me when I read the misinformation that is thrown out there.
    Alan Nelson Investor from Indianapolis, IN
    Replied 8 months ago
    NEW INVESTORS, READ MATTHEW'S POST...He is correct that there's lots of misinformation out there (and most of it well-intentioned). As a licensed but non-practicing attorney/CPA, here's most of what I've seen from newer and would-be investors: They spend way too much time (and money) trying to figure out nuances of incredibly over-complicated asset protection and tax avoidance strategies that (1) don't really apply for a small-time investor, and/or (2) create a bunch of "noise" that actually distract a would-be investor from hunting, analyzing and actually doing a deal Are you a new investor? Focus on getting a deal. Then retain a local attorney, CPA and insurance agent who actually work with other small real estate investors; ask for referrals from other local investors. Be ready to talk about your ultimate investing objectives, then follow the advice. In my experience, for most (not all) investors, the complicated entity discussion results in many people either (a) talking about entities instead of actually investing or (b) walking over dollars to pick up dimes, complicating their lives and costing a bunch of money for no good reason.
    Eric E. Residential Investor from Allentown, Pennsylvania
    Replied 19 days ago
    Well said Allen Nelson. I've seen it happen all too often. "But my guru referred me to this guy who will only charge me $4,000 to set up my LLCs". "But I have not bought a property, not even made an offer on a property, still trying to decide if I should invest the $4,000". :-( :-( :-(
    Mattia Settimelli
    Replied 8 months ago
    Hey guys I'm new to real estate investing in the US, but I'd like to start in a 6 months window. I have a spare 80 to 100k to invest and Id like to know two things, ahead: 1. I know the standard downpayment is 20% but I have no credit history in the US. Would you think will I be able to take it anyway? Could form an LLC and ask for a commercial loan help, in this regard? Or is better to pay cash for the whole price, this first time and then leverage the equity in the property to access financing for the next investment? 2. I am Italian, but other than freelancing in my home country, I have a business in the UK as a consumer goods brand builder through e-commerce. In 2020 I will open an US subsidiary to expand overseas. That subsidiary will be an LLC entirely owned by the UK business and will be probably based in NYC or Miami. To save on costs, I'd like to initially use that same entity also for real estate investing. Ok, I know it's better to separate equity in different things because they become an easy target in case, but I don't want to open too many LLCs at the same time. So, I read here that usually an LLC should be in the same state of the properties: why is that? Can't I invest in different states from my, say, New York LLC? Many thanks for your time. Mattia
    Edward Atter from Philadelphia, PA
    Replied 19 days ago
    By buying property in a state other than the LLC's "home" state, you will create a nexus. This means your business in New York would need to register as a "foreign entity" in the state you invest. End result -- paying LLC fees to two different states and lots more paperwork.
    Louis D. Rental Property Investor from 95660
    Replied 8 months ago
    For those of you in California you pay 800.00 per year for an LLC regardless of what state it is formed in. If you plan on leaving California some day then it may be better to form it our of state so when you move you don't continue to pay the 800.00 per year.
    Jan Scilipoti
    Replied 8 months ago
    I have one LTR, and my brother and I just closed on a home to use as a STR. We worked with a local lender and over the entire process we talked with them about setting up an LLC for the rental after closing. They seemed very supportive and recommended a 2nd home mortgage with good rates. They said we had to take title in our own names and then transfer title to the LLC. Two weeks after closing, they sold the loan and the new lender says they ‘do not deal with LLCs’. BP never mentions this possibility. Not every lender lets you transfer title to an LLC? What do we do now?
    Corey Graves Real Estate Broker from Redmond, OR
    Replied 8 months ago
    All good discussion here, I appreciate reading all the great thoughts and comments. I have recently been incorporating an idea we came up with relating to LLC's. We buy, finance and hold the properties in our personal names. This makes the lending process easier and cheaper in most cases. Then we sign a Master Lease and put it completely under the management of our LLC, this way the operation and liability of the property falls under the protection and insurance policy of the LLC without the lender red flagging our loan due to changing the deed into our LLC. As to how many properties one should put into one LLC is really a matter of several variables, after all an LLC is only useful for asset protection unless you are setting them up as a corporation as part of your tax strategy. Some of the items to consider are the value of the property, liability exposure, cost of insurance and if you have partners in it with you. A million dollars worth of properties is not a big deal for one LLC ( that could be several properties or just one depending on your area and asset class), again your insurance needs to line up with your exposure. I like to use the same LLC if I'm working with the same partners or going solo. If my partners vary I always have a separate LLC. Definitely not a one size fits all, hope this is helpful to some of you. Cheers, Corey Graves "Agent, Investor, General Contractor"
    Alan Nelson Investor from Indianapolis, IN
    Replied 8 months ago
    Totally agree with Matthew L.'s post...He is correct that there's lots of misinformation out there (though most of it is well-intentioned). As a licensed(but non-practicing) attorney/CPA, here's most of what I've seen from newer and would-be investors: They spend way too much time (and money) trying to figure out nuances of incredibly over-complicated asset protection and tax avoidance strategies that (1) don't really apply for a small-time investor, and/or (2) create a bunch of "noise" that actually distract a would-be investor from hunting, analyzing and actually doing a deal Are you a new investor? Focus on getting a deal. Then retain a local attorney, CPA and insurance agent who actually work with other small real estate investors; ask for referrals from other local investors. Be ready to talk about your ultimate investing objectives, then follow the advice. In my experience, for most (not all) investors, the complicated entity discussion results in many people either (a) talking about entities instead of actually investing or (b) walking over dollars to pick up dimes, complicating their lives and costing a bunch of money for no good reason.
    Jeff D. Real Estate Investor from Portland, Oregon
    Replied 8 months ago
    I have to respectfully disagree with part of your post. Its absolutely important for a newbie to learn about asset protection strategies early in the game. Not way down the road. When perhaps it's out of desperation after a lawsuit. Hence this discussion about LLC's. Last time I checked, the owner of an SFR rental can be sued and lose, just the same as the owner of a 200 unit apartment complex. So asset protection applies to big and small investors. And I doubt familiarizing themselves with asset protection is going to distract from time they would otherwise be using to find deals. Any more than getting familiar with types of financing, landlord laws, contractor pitfalls, etc. Sure, you can simply hire an expert for every aspect of investing and rely solely on their knowledge for every decision you have to make. But the experts aren't always experts. And if you have zero background knowledge you will never know if you are dealing with an expert or not. Be it an accountant, attorney, RE agent, lender, or contractor. Can't tell you how many attorneys I've heard say "well that's what insurance is for" when asked about asset protection and LLC's. And how many insurance agents share examples of successful lawsuits that went beyond the limits of a policy.
    Ken Goodman Investor from Los Angeles, California
    Replied 8 months ago
    Our portfolio of rentals is located in Maryland, and we ran into a problem there. Some counties in Maryland will not transfer property from personal to LLC without the 1% sales and recordation tax (that's alot of money!) and some counties will. After forming our LLC, we discovered that we couldn't move all of our properties into it without paying the tax. Anyone with advice on this issue would be greatly appreciated. (Section 12-108 (bb))
    Eric E. Residential Investor from Allentown, Pennsylvania
    Replied 19 days ago
    I believe the same situation exists in all of PA. 2% transfer tax based on assessed value (not the one dollar sales price).
    Matthew Wang Investor from New York, NY
    Replied 2 months ago
    which counties?
    Grant R. Rental Property Investor from Warsaw, IN
    Replied 8 months ago
    Thanks for sharing these notes. Good stuff. Regarding #2, it's not entirely accurate. If you have a sole-member LLC (one owner), your LLC does not file a "separate tax return"; there are some additional forms, but you file along with your normal personal return. You still get the benefits mentioned, but it's not as separate as you might think. Multi-member LLCs are filed separately for obvious reasons (you can't combine the personal returns of multiple people). Thanks again for the article!
    Michael Sepe
    Replied 19 days ago
    Well said Grant. Thanks
    Felix Gaona
    Replied 5 months ago
    What if an investment group created a new LLC for each individual property, and let the LLC go in to tax forfeiture? Would they ever have to pay those taxes considering the property would be paid for and LLC no longer needed again ?
    Felix Gaona
    Replied 5 months ago
    I mean franchise tax specifically
    Nate Arrington New to Real Estate from Ogden, UT
    Replied 3 months ago
    Are there any disadvantages to creating an LLC if we are in the middle of our first house hack? We’ve already obtained personal financing but we’re thinking of starting an LLC for the basement we rent and then continue to build a portfolio from there. Any thoughts?
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    Hey Nate, First congrats on the House Hack. Since you need to own in your own name to get the low money down financing, the LLC can't be the owner. You can, however, use the LLC to be the property manager. That would give you some liability shelter and not break the rules with the bank for transfer. Get an insurance policy with plenty of liability also! Matt
    Natalie Kolodij Accountant from Charlotte, NC
    Replied 3 months ago
    An LLC does not create tax write offs. If your LLC is a single member- It is literally still reported on your 1040 on either schedule C, E, or F exactly as it would be if the LLC didn't exist. It would not even have it's own separate tax return. An LLC only has a separate tax filing if it has multiple members, or has an S election. Also reporting legitimate business expenses on your 1040 on any of the appropriate business schedules mentioned above does not look "squirley" to the IRS. 73% of businesses operate as sole proprietors meaning the reporting goes directly on the 1040. A "Company" is not an IRS term- A "Trade or business" would be, and it's governed by IRC 162 and meeting levels of involvement in that code. It applies regardless of entity or not.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    Thanks for the clarity, Natalie! I agree that for smaller investors the LLC is not necessary for write-offs, but for investors looking to scale and have partners, the LLC will give a place to consolidate business-related expenses for the partnership and pass them through accordingly to the owners. I should have been more clear on that!
    Heather Hall
    Replied 3 months ago
    Agree!
    Ryan Johnson Rental Property Investor from Houston, TX
    Replied 3 months ago
    Can I still get a conventional fixed 30 year mortgage if I buy in a LLC?
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    Not that I've ever seen, I wish though!
    Andrew Watson from Austin, Texas
    Replied 3 months ago
    Anyone know a landlord who has been sued by a tenant for over $1 Million? I have asked this question to many investors and attorneys and have yet to hear an example. Insurance seems to be enough for those with <~10 long term rental properties and wanting to use residential mortgages.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    I've never seen it, good question
    Darrell Boazman
    Replied 3 months ago
    How would I put properties that are in my personal name in a LLC if they have a bank note on them .
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    It's complicated, but you could move them with a quit claim deed, then refinance them right away into the LLC.
    Heather Hall
    Replied 3 months ago
    "Because it’s an entity with its own tax return, LLCs allow you to write things off (i.e., business-related expenses like your cell phone bill)." I don't think that's true at all, at least for a one-member LLC. You just file LLC profit/loss on Schedule C of your own individual tax return. Are you referring to something else? The IRS treats one-member LLCs as sole proprietorships for tax purposes. This means that the LLC itself does not pay taxes and does not have to file a return with the IRS. As the sole owner of your LLC, you must report all profits (or losses) of the LLC on Schedule C and submit it with your 1040 tax return.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    Correct, this doesn't apply to a single member LLC. It's more applicable for larger ventures with partners.
    Lindsey Mannix
    Replied 3 months ago
    Great article! Do you suggest setting up an llc for each rental property or do you hold multiple properties in the same llc?
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    We do multiple properties into one LLC. Read the thread above, there is a ton of comments on that subject!
    Rik Patel Real Estate Agent from Miami, FL
    Replied 3 months ago
    How does #2 make sense? If buying in an LLC the rates will be much higher? You can just get a personal umbrella. Also, how are you transferring properties into your LLC without triggering a due on sale clause?
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    Hey Ric, The mortgage rates will be nominally higher but the rates will only be locked for 5 to 7 years with an LLC. You can transfer with a quit claim deed and refinance right away after.
    Edward Wodziak Investor from Woodridge, Illinois
    Replied 3 months ago
    If you a buy a rental worth 100k and only put 20% down, but you say don't bother to put it in a LLC, and the tenant slip and tries sue, can't they go after your personal belongings like your house (especially if it is paid off and worth alot)?
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    Your liability insurance would step in on that first, which normally covers claims up to a million.
    Georgie Sampang
    Replied 3 months ago
    We paid off our rental which is in our name. We plan to move it to an LLC. Should we take out our equity as much as possible before we transfer to the LLC or sell it to the LLC and get the LLC to pay us back? Or what is the best way to get our equity and reduce our taxes. We worry that if we get sued, we lose all the equity that is sitting there. Also we owe no mortgage and less tax deduction.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 3 months ago
    If you sell it to the LLC you would likely have to pay transfer tax. I would transfer it with a quit claim deed, then refinance it in the LLC. The cash out is not taxable as it's a loan. Then take that cash and do more deals in the LLC. Good luck!
    Phillip Jones
    Replied 3 months ago
    I really wish operating an LLC, or one for each unit were a reasonable option. I looked at this from multiple angles, with spreadsheets and accountants, and determined that it would be easiest and best to keep the properties in my personal name and get a large Umbrella Policy. The challenges with the LLC method were: 1. Once the property was transferred to the LLC, the property appraiser would reassess and push taxes way up, about 50%. 2. Each LLC had to have a tax return filed annually and issue 1099's. 3. Insurance for the property via an LLC was higher than in my personal name. I keep very good records and separate bank accounts. I also have a strong lease. I would hope the umbrella would catch any liability that the main policy can't. Life is full of risk, I've done my best to reasonably mitigate it. In addition, I have excellent relationships with my tenants and keep my properties in very good condition. Best to all.
    Steve Vaughan Rental Property Investor from East Wenatchee, WA
    Replied 3 months ago
    I'm with you, Phillip. If it's a residential property (just love how property type is never discussed in these post and ghost blogs) and if you don't have partners other than a spouse and if you are wanting /needing a mortgage, I also hold in personal name, act above board and carry good insurance. I put my paid-off residential property in LLCs via warranty deed if I want to. I own all commercial assets in LLCs, paid off or not. Property type, debt, partners are the main driver's behind my decision to LLC or not. Another miss and lame article IMO. But at least he didn't come back to address the hornets nest of questions. Likewise never see in the forums on this topic. I am glad he's not an attorney selling packages, but that's about it.
    Oren Kachel from Israel
    Replied 3 months ago
    any differents if you are an out of the country investor with no U.S. citizenship and social security number?
    Ziv Fishfedder
    Replied 3 months ago
    It's mentioned in the video you can make 1 2 3 4 homes your primary residence ? How's that possible ?
    Mark F. Rental Property Investor from Bergen County, NJ
    Replied 3 months ago
    Thanks Matt for the article. Fellow NJ investor, working on my second investment property. Would love to meet you post covid days! Always enjoy your podcast appearances.
    Tamar Hermes from Los Angeles, CA
    Replied 3 months ago
    @Matt Faircloth This is such valuable information, and every inventory should take the time to set up an LLC once they have assets and for tax savings for sure. One thing that has come up for me lately is whether or not to set up the LLC in the state where the property is located. Many people told me to set up an LLC with CA properties in another state to avoid the $800.00 yearly fee. My attorney has strongly discouraged it. I decided to pay the fee as I collect rents in CA.
    William Patton Lender from Philadelphia, PA
    Replied 3 months ago
    Not a lawyer, merely a law student, so I do not, nor am I licensed to, give advice yet. But it is my understanding that the losses are limited to your investment in the LLC (or whatever organizational entity you choose with exception of a General Partnership or the GP in an LP etc.). So, every assets you hold under one LLC is at risk of being completely wiped out by a risk not associated with the operation of that specific property. That may not be an issue if, like a few above have mentioned, you an insurance policy which covers the specific risk and the appropriate amount of money. However, if you do not have insurance, or some other financial hedge to cover a judgement against a real estate investor's holding LLC, then any lawsuit associated with ANY of the properties means that EVERY asset in that holding LLC is fair game for the lawsuit. For example, say your holding LLC has 5 properties in it and your holding LLC get successfully sued on a matter arising out of one of the properties (but not the other four). Assume further that the judgement against your holding LLC (arising from the one property) is $1 Million dollars, and the total value of the assets under your holding LLC for all 5 properties is also $1M, then, if it is a final judgement then ALL of the $1M in assets held under that LLC may be completely wiped out. However, if you had that $1M of assets evenly divided into 5 different LLCs and one of the properties faces a successful judgement in the amount of $1M, then only $200,000 of your assets (under the relevant LLC) is at risk. Therefore, you can spread risk and in this instance seems analogous to FDIC insured deposits (e.g. if you have $1M in checking deposits keep it in 4 different banks to fully "insure" your $1M in checking deposits) In my non-professional, laymen point of view It is up to you how you want to manage the risk but the bottom line is that the assets operating under one LLC are effectively cross-collateralized.
    Gerald Harris
    Replied 3 months ago
    Why was your attorney so adamant about not going out of state? Are there benefits to setting up an LLC in ca??
    Zachary Lee from Cumberland, MD
    Replied 20 days ago
    Get insight especially for beginners
    Frank J.
    Replied 19 days ago
    LLC is protection layer.....plain and simple. Anyone with half a brain and internet connection can set it up. This article makes sound like LLC is complicated and should be avoided. If you own a property as an investment then you should always get an LLC.
    Allan Phelps
    Replied 19 days ago
    LLC For a foreign investor. I am a new investor in the US, am a Canadian resident and I have previously bought and sold US properties, I'm getting different opinions on LLCs. Presently I have just started Brokering for large asset based private money lenders. I have interested wholesalers interested in obtaining financing but just learned that the corporation I am acting for, pays my fee through the Title co and they must be payable to an entity. Does this have to be an LLC? I am led to believe the Canada Revenue Agency does not acknowledge an LLC or any tax exemption or expenses within the LLC. Does anyone have knowledge in this area? Can this entity be a sole proprietorship unlimited, if so would a registered proprietorship with the government in Canada and with it's own bank account be applicable as an entity that the title company would make US cheques payable to. Alternatively I could set up a number company in Canada and subsequently re register it in ( any state) (suggestions) in the US so that it was filed with the IRS and with the Canadian Revenue Agency, both. If I continue with this, I expect to to have a large clientele in the US based on the response to date. Any suggestions, comments or who I should chat with. Thanks much
    Eric E. Residential Investor from Allentown, Pennsylvania
    Replied 19 days ago
    I'm shocked that no one brought up trusts? How about taking deed in a trust? Some lenders will give you a hard time, but we just refinanced 8 properties with a commercial bank, all properties are in individual trusts. You can make your LLC beneficiary of all the trusts. It CAN give you anonymity. I would still recommend a good umbrella policy.
    Neno Kolonich New to Real Estate from Utah
    Replied 18 days ago
    Hi Eric, Your trusts are created by an individual, they own the property and finance the property, but the LLC is a beneficiary ?
    Neno Kolonich New to Real Estate from Utah
    Replied 18 days ago
    This is a great article to provoke thought, thank you. A lot of the comments I read focus on tax advantages and financing. For those starting in later stages of life - such as myself- who may have an established networth(outside of real estate investments), the benefit of an LLC would be to create a barrier between my RE holdings and my "private networth" from a paycheck, bonus, residence, vehicles ( I am planning on doing this while hanging on to my primary day job for a while). Just a thought, worth exploring with both a CPA and a Lawyer for each individual scenario.
    Wilson Pun
    Replied 18 days ago
    Thanks for the great article. A tip that I found really useful too is that while you need to be an individual to take initial advantage of conforming Fannie Mae loans (the nice fixed rate, 30-year low interest ones), the servicing guidelines for Fannie Mae loans that were revised at the end of 2017 now allows transfer of title from an individual to LLC without triggering the due-on-sale clause. There are some checkboxes to check, but definitely good for people to keep in mind to take advantage of good loan terms and LLC protections.