What would be the best entity to hold a real estate SFH?

3 Replies

hi,

I have 4 SFH home rental properties with lien directly under my name. many people recommended me using LLC to mitigate risk ( however LLC still is pass through entity) so not sure what risk does it mitigate?

Can the pro's guide me what is the best entity for risk mitigation and for tax purposes?

Thanks,

Deepak

@Deepak Gupta  , you'll need to confer with your legal and tax professionals because there will be a different answer for everyone and you'll find different opinions here.

My understanding, though, is that the "pass through" just refers to taxes, not liability.

thanks Brett,

I am looking for tax purposes but I am a passive investor.

For tax purposes, holding them in your personal name is fine. You only pay ordinary income tax on the net rental income, after depreciation and expenses. Holding the properties in an S-Corporation, Partnership, or C-Corporation would not change the nature of the income. Holding them in a C-Corp would subject you to an additional tax, as the corporation must pay a tax, and then the individuals receiving dividends are again taxed on the same income that the corp was taxed on. Rental real estate has tax advantages that make holding it in your own name favorable. For liability, I would get liability insurance.

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