How do you buy your properties? All in the same LLC?

Question

I'm still trying to figure our how to structure my acquisitions.

Do I purchase 50 properties and place them all in the same LLC? Purchase them in separate LLCs?

My lawyer doesn't like that idea. He would like me to set up 50 different LLCs, one per property to isolate liability.

Would it make more sense to get a large insurance policy to cover all the properties and purchase in 1 LLC?

Having 50 different LLCs requires 50 articles to be filed with the state for a fee, then get 50 EINs, set up bank accounts, etc. Lot of hassle. I gather most people don't do that. Ways to limit liability? Am I too worried here? Any suggestions? What do people actually do. Would love to hear some real experiences and what you're actually doing.

Christian Becker · Answer

Appreciate the advice. Hoping to see some more responses as well, but I think I'll keep a few under one LLC for now until I grow larger, then form another LLC, etc. Also checking out the insurance options.

Christian Becker · Answer

@Frank Geiger

Thanks for that. Very helpful. Have been wrestling with what a good number is. I'm buying SFR in Ohio in price range $35-60K. Putting about 10-20 into one LLC would probably make sense to me. And avoid unnecessary costs, striking a balance between risk and workload.

Christian Becker · Answer

@Jilian Guan

Thanks. Currently have one major partner ready to go, so will keep this with the one for now.

Christian Becker · Answer

Talking with several property managers, they're telling me that most investors lump together all their properties in one LLC. Of course, if one house burns down and kills the family and one survivor sues for $10 million, you could loose all the assets of the LLC. If it holds 50 properties, I guess you'd loose all of it.

Kimberly Vallance · Answer

I can see benefits both ways - I have a lawyer friend who agrees the liability would be reduced the most with all separate companies. However, the overhead for that would be...trying. I think something in between would be acceptable to me. That might be what you have to figure out - what is your risk tolerance in this area. This is a consideration I've been mulling over recently, so I'll be interested in seeing any other comments that arise from investors with more experience.

As for the insurance - having worked for a property insurer - you can buy a policy that covers as many dba's as you and the carrier are willing to put on the policy. The issue comes if you have an aggregate policy limit that you reach or exceed. Perhaps consider an umbrella policy to take over if that is a concern. Then the umbrella policy would only kick in if your underlying insurance is maxed out. I hope that never happens to you, though.

Jian G. · Answer

@Christian Becker

If you have investors you need to setup different LLC from properties to properties if you have different investors.

Frank Geiger · Answer

Not sure what the "correct" answer is but I go with different LLC filed in each state with up to 10 properties in each according to the risk class and worth of the property. Maybe try a different lawyer because that sounds like a nightmare.