Using a business or LLC to buy properties?

Question

I'm interested to know how most of you purchase your SF or MF homes used as rentals.  Are you buying them under one business name of a real estate company you set up?  Separate LLC's?  Single LLC?  I have 3 properties now, 2 in Florida and 1 in MD but am continuing to add to my portfolio in the form of buy and hold rentals.  All 3 I own now I have lived in and are in my name.  However, as I go forward I will be using cash and investment property loans to purchase other rentals.  I feel like I should be buying these under a business.  What are the advantages and disadvantages of doing so?  I currently hold umbrella insurance for myself in the event I have a liability claim in any of the houses I currently own to protect my personal assets.  Any information will help, thanks!

Account Closed · Answer

It does not matter if the proprieties in an LLC or personal name the LLC can get sued and name the owner of the LLC and sue both. Now get a good insurance policy and be protected.

Joe Gore

Mitchell L. · Answer

It is highly recommend and advised not go hold ANY investment properties in a personal name due to possible lawsuits amongst other reasons.. Do a deed transfer, pay the doc stamps, get that title insurance you will need for the long-term rental and you will sleep better at night!

Good Luck

Anne Wallace · Answer

My understanding is that if you transfer properties held in your personal name to an LLC that it can nullify the terms of your financing . Hypothetically if you bought your property in your name with a 30 year mortgage and then transferred it to an LLC your loan could be " called". I am no expert. Call a good real estate attorney. Just something to check out.

Arlan Potter · Answer

Keep it simple.

if you are going to do debt financing, the banks will require a personal guarantee anyway. The benefit from an LLC is in liability protection. I own 55 rental units and have flipped many more. All in my and my wife's name. We just carry plenty of liability insurance.

Now as we are getting this group of properties paid off any new large investments will be through an LLC to keep segregated the new group from the old. That will keep our large equity position on our current group free from any major risk from potential claims coming from the highly leveraged properties.

I am not an expert.

See a good attorney for advice.

Abhi Golhar · Answer

@William Allen - Different states have different rules regarding how LLCs are handled. I would speak with an asset protection and real estate attorney in your state along with reading a little bit about external vs. internal liability.