Updated about 4 years ago on . Most recent reply
Multi family investment structure
Is there any need to set up an LLC or any separate entity for passive multi family investments? We set up an LLC last year for a couple of rental homes that we have but are now branching out into some passive syndications in the next couple of months. Would there be any purpose to set up an additional LLC for these investments? Should we do it through the LLC that we already have? Or just leave it in our own names? Pros/cons?
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The primary purpose of an LLC is for asset protection--ensuring if something goes wrong, someone cannot come after all your other assets. As a passive investor or limited partner in a syndicated multi-family investment, your assets are not at risk--the only money that is at risk is the amount of money you have invested in that particular deal. This should be clearly identified in the operating agreement for the syndication. Therefore, I do not believe there is any value to creating an alternative LLC simply for passive real estate investing--you are fine just going through your own name or through the LLC you already have. Creating an alternative LLC just for passive just adds expense as you have to file taxes for that entity, etc.