Suggestion on when to put your homes on an LLC verse your name

21 Replies


I am a new investor, looking to lock in my first duplex in the matter of weeks. Super happy to finally get things rolling. When should you start putting your investment home under a LLC verse your name personally?

@Todor Ialamov , Just want to make sure the OP is getting good advice. Different lenders have different requirements. Some allow lending to an llc and some do not. If you are specifically talking about conventional financing then yes, a conventional single family residence mortgage cannot be lent to an llc. Also most conventional mortgage lenders expressly do not allow conveyance of the property to another owner (of which an llc would be considered). Additionally some of the benefits of having an llc are negated by doing this.

@John Brodeur Valid points John. I should have disclosed that lenders generally don't allow conveyance. Most investors in my observations are doing it anyways, though. Technically if I am not wrong they could force the loan on you, but I have never heard it happen.

@Tracy Williamson

I have an llc, started straight out of the box with my first duplex, now I am at a point where I need to start a second one for my next purchase. I know of many other people who do it under their own name, I prefer the protection of the llc.

@Tracy Williamson

FNMA and FHLMC (Fannie and Freddie) do not allow LLCs to hold title. But they aren't lenders, they are government-sponsored enterprises. Any lender using conforming loans will have to meet those guidelines.

There are plenty of lenders that do allow LLCs to hold title.

Some of the advice here has been incorrect, or not clarified.

@Greg Soon

Yes this is true, so my first purchase was a duplex that was selling way below market value so the bank was willing to finance the full purchase price, granted the place looked like a dump, but I am also a contractor and knew that all it really needed was some cosmetic repairs, I purchased it for $24,000.

It came with tenants that I ended up having to evict. But it all worked out perfectly because once I had the first tenant out, it gave me the opportunity to remodel that unit, cost roughly $2000. Tops I was able to increase the rent from $400. Per month to $900. once I had that one rented the family that was in the other unit had moved in the first tenants I evicted from the first unit. (They were all related) I had a no sublet clause in our rental agreement, which gave me cause to evict all of them. ( which I did). Perfect timing, gave me the opportunity to remodel that unit, ( again about $2000. Tops) this gave me the opportunity to raise the rent for that unit from 675.00 to 1100.

It didn't take long to save enough money to get the 20% I needed to purchase my next property. And so on and on.

I currently have 20 units in 3 years, my goal is to get to 50 and see how much time it requires me to manage them. If I feel like I can handle it, I will reset that goal to 100 units .

Don't do what I did, I sat on the fence for 2 years before making my first purchase, I over thought everything, and nothing was happening. My only regret was not just jumping in, using common sense and good math skills.

Good luck with your new business venture.

@Greg Soon

It doesn't have to be commercial, but that's probably the best general description.

Any non-conforming and/or, non-TRID loan should fit the scenario.

Originally posted by @Bud Gaffney :

@Tracy Williamson never. I think it’s a waste of $

Bud, can you clarify why it's a waste of money in your opinion? 

Also I would never say never. Things like the decision to put property in an LLC, buy in an LLC, or buy in your own name is highly dependent on all of the individual factors at play for the investor. There are personal tax considerations, the structure of the investment (sole ownership or ownership with a partner), personal comfortability with risk, the loan products you have access to, personal income, personal debt to income ratios, property income, state of ownership (different states have different rules on transfer tax), and even the future strategy you are planning on taking with your investments etc. The list goes on. We need to be careful with giving blanket guidance to individuals, especially those who are new to REI.

@Tracy Williamson my thoughts are as soon as you can. My experience has been that as a new LLC/not part of a syndication, you will personally secure the obligation to a credited for the LLC anyway.

In my mind, having the LLC makes you think of the rentals as a business-you need an accountant, legal team, property management decisions are more streamlined, and there is some pride in your own business, as well as those are the steps larger operators have as minimum requirements, and makes you ore credible at REIAs/networking events.

There are a host of other factors that are constantly debated with strong, valid arguments on both sides, and I’ll steer clear of those to stay on topic to your post. Great question, and congrats on the duplex.

A lot of great nuggets to take from everyone. I still have lots to learn, but I am open to all knowledge.  I know things will start to make sense as I continue to grow. Fear is the last thing stopping me now. 

Thank you everyone.

@Tracy Williamson

As soon as the mortgage is paid, my properties go into a blind trust. If I want extra protection I then place that property in my LLC.

EVERYTHING is not in my LLC. I bring some in and remove some when it suits me and my financial consultants.


How does an LLC Logically Protect a Landlord?

A lot of landlords are advised to put their properties in the name of an LLC for asset protection.

While this is basically true, the reality isn’t what most landlords think.

If a legal issue occurs with your property resulting in a lawsuit, there's a decent chance the plaintiff's attorney will be successful in "piercing the corporate veil" of your LLC and being able to sue you directly.

Why? Because most landlords don't follow all the legal requirements to maintain their LLC as a separate entity.

So, what else can a landlord do to protect their personal assets from a business lawsuit?

Well, what types of lawsuits is a landlord most likely to face?

Lawsuit from tenants for personal injury!

How many tenants have the funds to pay a retainer fee to an attorney to handle the lawsuit?

Not many! Most will find a personal injury attorney that will take their case on contingency – meaning the attorney will charge very little, if anything, upfront, but take a third or more of whatever they collect.

And here is the secret of using an LLC to protect your personal assets – by "hiding" them!

You see, there’s nothing worse for an attorney taking on a contingency case, fronting all the legal expenses and investing their time to win a case and obtain a court judgment – then NOT be able to collect on the judgment.

So, astute attorneys will research the available assets and insurance before accepting a case on contingency. If they can’t find either, why would they waste any resources on the case?

If all they can find is the property in the LLC, it may not be worth the additional hassle of trying to force a sale of the property to collect on their judgment.

So, they'll research who owns the LLC and what assets that individual has.

If you act as the agent for your LLC and use your personal address – guess what? You've just made it super easy for them to find you and now they can research your other assets and probably sue you!

So, if you're going to go through the effort of setting up an LLC, be sure to take the extra steps to find an attorney, CPA or other professional willing to act as the agent for your LLC and allow you to use their address. Most will charge a reasonable annual fee, but think of it as insurance.

Lastly, consider just getting more insurance, typically an umbrella policy to cover your entire portfolio, instead of OR in addition to an LLC.

Of course, discuss all this with an attorney!


Just a word of caution from an insurance perspective. If you change the ownership of the property to an LLC you need to change your Insurance policy to that entity. Talk to your agent when you are quoting this. That way they can make sure you do not start with policy in your name that can not be transferred to an LLC. ideally you would want a policy that would not have to be cancelled an rewritten to the LLC. The Mortgagee would get notice of the cancellation. So, even if it is more expensive to use a company that will just endorse the policy to the LLC, it may be better for you.