Best way to set up an LLC

3 Replies

My wife and I are new to real estate. We have a home that we turned into a long term rental property. We are planning on buying more homes in the same city in the future. Should we set up an LLC for each property, or just one big LLC for all the properties? TIA.

Hello Jake,

I am not a lawyer, so I am not qualified to tell you what to do in regards to protecting yourself from liability, but I can share with you what I do.

I like to keep rentals in their own LLC's as I think they are the most likely to draw a lawsuit. I understand that there is always a risk of being sued, but I do not want to expose multiple properties to one potential lawsuit. I also think that using an abundance of caution could potentially discourage someone who is looking around for a good candidate to sue.

Another big factor is probably the size of your operation/ investments. My portfolio is pretty small, so we are talking about a few extra LLC's for me. I imagine the big players do not keep single residential units in their own LLC's, but that is just speculation on my part.

Erik 

Hi Erik,
Thank you for the reply. That make a lot of sense. My portfolio is small as well, but I definitely want to protect each of my investments separately. I will plan on making a separate LLC for each property. Thanks again for you help.

It seems some investors set up an LLC for each property. Our lawyer suggested grouping them by size so as to not have properties if disparate sizes in the same LLC. Make sure you carry ample liability insurance too and keep your personal stuff completely separate.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here