LLC or not?

Question

I've read a few of the forums on here about making an LLC or not for my real estate ventures and am pretty confused.

I am in the process of finding and purchasing my first multi-family property. From what I understand, it might be a bit much to make an LLC at the moment. However, should I plan to make one in the future and move this property into it? How does that affect my loan on the property? Or would it make sense to refinance directly into the LLC down the line?  Wouldn't an LLC make it easier to manage finances? Would an LLC make more sense once I move into commercial properties (5+ units)?

Elealeh Fulmaran · Answer

You’re not wrong to be confused; here’s the clean path I coach. For your first multifamily, buy in your personal name to keep lending simple and terms flexible, pair it with strong landlord and umbrella insurance, and run the asset well. Revisit entities after you’ve got a few doors and a rhythm, or sooner only if a lender requires it. Moving title into an LLC later can affect your loan or trigger due-on-sale, and some lenders won’t refi from or into an LLC easily, so talk to your lender before changing title and to a local attorney/CPA about liability and taxes in your state. LLCs become more useful as the portfolio grows or when using DSCR/commercial loans that allow entity borrowing; until then, prioritize getting the first deal closed and cash flowing.

Izaiah Barba · Answer

I agree with @Michael Plaks that an LLC usually does not help your taxes on rentals. Where I have seen the biggest wins is liability and clean operations. For a first small multifamily, many conventional lenders want the loan in your personal name, then you can discuss a title transfer to an LLC later with lender approval. Practical checklist: get an umbrella policy, keep completely separate books and a dedicated bank account, and use a simple software like QuickBooks so your income and expenses are clean.

Michael Plaks · Answer

Self-employment taxes do not apply to rental properties, and OP said that they are buying a multi-family property.

Your accountant likely set-up an S-corp for a different type of business, maybe wholesaling or flipping.

Context matters.

Jason Malabute · Answer

It really depends on your situation, but for the most part, putting a property into an LLC is more about liability protection than tax savings. By default, a single-member or husband-and-wife LLC is a “disregarded entity” for tax purposes — meaning the IRS still treats it the same as if you owned the property in your own name.

Ashish Acharya · Answer

Great questions, this trips up a lot of first-time investors.

From a tax perspective, an LLC doesn’t actually change how your income is taxed unless you elect a different status (like an S corp). It’s mainly for liability protection and cleaner accounting. For a first property, holding it in your own name is usually fine, especially if financing is residential, lenders often won’t allow title transfers to an LLC after closing without triggering a due-on-sale clause.

If you want the protection later, you can always form an LLC and refinance into it when rates or terms make sense. Once you move into commercial properties (5+ units), LLC ownership becomes more common and smoother to finance.

In short: keep it simple now, protect yourself with insurance, and plan to use LLCs once you scale. Happy to connect!

Michael Plaks · Answer

You're predictably confused because there're conflicting opinions. You will never get a consensus when it comes to LLCs.

But here is the shortest possible version:

1. An LLC will NOT help you reduce taxes (with some exceptions). 2. Many people suggest LLCs for legal protection. I'm not an attorney, so I don't have a say, but see below.3. LLCs can trigger extra costs ($800 per year in California for example), extra hassles (such as a need for a partnership tax return between two spouses in some states), extra paperwork and so on.

Here is what one attorney says about LLCs:https://www.biggerpockets.com/forums/109/topics/1212815-i-ne...

Crystal Smith · Answer

As of this writing you asked this question about one month ago so my reply might be moot.  I purchased my first multifamily in my own name because I used a traditional bank lending and they would not lend to an LLC as I was going to be an owner occupant.  So first check with the lender to see if they will lend to the LLC.  If yes- the purchase with the LLC.  If no then purchase under your own name.

If you find a lender that will provide you with a DSCR loan in an LLC - then refinace to the LLC later.

Tony Bacon · Answer

Well, if it's your first property, an LLC won't really offer you that much protection. You'll still deal with pass through liability/taxes. But it can save some taxes (like i commented below). It would be a good idea though to start building history with the LLC so in the future you can qualify for lending and what not through the LLC. But, to start it'll be pass through, so based on your personal credit, etc. But once you have a few years of operating under your belt, the LLC can start qualifying for it's own lines of credit and stuff.

Tony Bacon · Answer

That's not necessarily true, if you file an LLC as an S-Corp you can save some tax liability on self employment taxes. I want to say it's like 7% or something for social security/medicare tax? I'm not an attorney, I just know my accountant files as an S-Corp for me and the year I didn't have an active LLC I had to pay like 4k more in taxes.

LLC or not?

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