How many single family rentals do you keep in one LLC?

Tyler, Texas
General Real Estate Investing
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How many single family rentals do you keep in one LLC?

Natalie Stanley
Member since 2024 · 9 posts · 5 votes

How many single family rentals do you all keep in one LLC? I have around 100 single family homes in one LLC. I have heard that I should have an LLC for each home but it seems administratively burdensome to have 100 bank accounts and 100 different tax filings, credits cards, checkbooks, etc... Can others please share how they think about liability exposure in an LLC. There are large investment funds with thousands of single family homes, I can't image they have an LLC for each home.

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Benjamin AakerPro Member
Rental Property Investor · Brandon, SD · Member since 2015 · 1k+ posts · 1k+ votes
2y
Congratulations on amassing such a large portfolio. This is a great question that gets answered a lot here and you will hear very many different answers. I recommend to have no more than 10 properties or $1 million in an LLC.

The point is to have a sort of firewall between each LLC. If you have a loss (think slip and fall lawsuit) on one of your SFRs now, it is fairly easy to have a verdict that spills over into one of your 99 other properties. An LLC would limit that, though not completely remove it as a possibility.

The LLCs need to be substantially run as their own business. No intermingling funds is one such difference. This will mean a lot more bookkeeping and accounting work for you to switch now. That's why I personally allow 10 properties or 1M. It's a nice balance for me. Remember - it's about limiting your liability. Nothing completely protects you.
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  • Benjamin AakerPro Member
    Rental Property Investor · Brandon, SD · Member since 2015 · 1k+ posts · 1k+ votes
    2y
    Congratulations on amassing such a large portfolio. This is a great question that gets answered a lot here and you will hear very many different answers. I recommend to have no more than 10 properties or $1 million in an LLC.

    The point is to have a sort of firewall between each LLC. If you have a loss (think slip and fall lawsuit) on one of your SFRs now, it is fairly easy to have a verdict that spills over into one of your 99 other properties. An LLC would limit that, though not completely remove it as a possibility.

    The LLCs need to be substantially run as their own business. No intermingling funds is one such difference. This will mean a lot more bookkeeping and accounting work for you to switch now. That's why I personally allow 10 properties or 1M. It's a nice balance for me. Remember - it's about limiting your liability. Nothing completely protects you.
    4Reply
  • AJ ExnerPro Member
    Lender · Springfield, MO · Member since 2023 · 654 posts · 315 votes
    2y

    Natalie,

    100% agree with @Benjamin Aaker, especially considering that one of the main reasons many utilize an LLC is to limit your liability. If they are all bundled into a single LLC, then it could create liability issues with other assets on something that big.

    I have clients that do both, but it really does become what you are willing to manage. Some lenders are more flexible on the account information that is needed, so the clients that do it that way will actually name the LLC after the exact address which makes it a bit easier to track.

    [email protected]417-427-2612
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  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    2y

    1.  See above.  Plus, it makes it easier to work with partners.

    0Reply
  • Kevin S.
    Member since 2024 · 400 posts · 240 votes
    2y
    Quote from@Natalie Stanley:

    How many single family rentals do you all keep in one LLC? I have around 100 single family homes in one LLC. I have heard that I should have an LLC for each home but it seems administratively burdensome to have 100 bank accounts and 100 different tax filings, credits cards, checkbooks, etc... Can others please share how they think about liability exposure in an LLC. There are large investment funds with thousands of single family homes, I can't image they have an LLC for each @Natalie Stanley

    @Natalie Stanley

    Hi Natalie, I see that you are different than most investors here on BP. You chose SFH over MF which is what I am leaning towards.

    Can you share why you chose SFH?

    How much capex do you factor in for SFH? Renovating kitchen is lot costlier than a smaller kitchen in a duplex/quadplex.

    Are they all scattered over the country or do you cluster them over smaller area/cities?  

    What are your criteria when you buy them? Age of the home, neighborhood, price range, no. of bedroom/bathroom, type of roof, any other features/specs?

    Cash flow must be harder to achieve with SFH than MF, at least in the beginning?

    Thank you.

    0Reply
  • Frantz JosephPro Member
    Rental Property Investor · GA · Member since 2017 · 62 posts · 44 votes
    2y

    @Benjamin Aaker

    Administrative headache, 10 homes 1million in an llc?. 10 llc’s how much are these home? 100k each ? What if the homes are 200-250k each than your looking at 20-30 llc with 1,000’s of dollars for tax work every year. I think he might just increase his insurance liability coverage per property. Plus he gets a large discount if he has an umbrella policy for the properties.

    1Reply
  • Owen RosenBusiness Member
    Professional · Clinton Township, MI · Member since 2015 · 678 posts · 259 votes
    2y
    Quote from @Account Closed:
    Quote from @Natalie Stanley:

    How many single family rentals do you all keep in one LLC? I have around 100 single family homes in one LLC. I have heard that I should have an LLC for each home but it seems administratively burdensome to have 100 bank accounts and 100 different tax filings, credits cards, checkbooks, etc... Can others please share how they think about liability exposure in an LLC. There are large investment funds with thousands of single family homes, I can't image they have an LLC for each home.

    You put equity into LLCs not houses. The amount you are willing to risk. So, if there is zero equity, you can put all house into a single LLC. If one house has $100,000 in equity, it needs it's own LLC.

    Here's why:

    In the event someone wants to sue you, they want money. If there is little money  in the LLC, the attorney won't take the case. There is nothing to collect so nothing to pay him. 

    Just use umbrella insurance and 99.9999% of the time that is all it takes. 

    If it's that .0001 of the time and you get sued, an LLC won't stop it from happening anyway. That's why you have umbrella insurance.
    This doesn't make any sense.  If a property is insured, there is money to go after.  Even with minimum liability of $100,000 there are plenty of attorneys that will take a quick $33,000.

    A vast majority of the comments I see on this board (from people that are not licensed insurance agents) regarding umbrellas and liability insurance are way off base.  Be careful.  Work with someone that is licensed and trustworthy.  Take the time not just to get the cheapest price but the best advice and consultation.  Insurance is NOT all the same.  If your agent makes a mistake or gives bad advice, they're insured and you have protection.
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  • Kevin S.
    Member since 2024 · 400 posts · 240 votes
    2y

    @Owen Rosen

    Thanks for the caution.  Now, could you provide suggestions in her case or other case scenarios?  

    0Reply
  • Owen RosenBusiness Member
    Professional · Clinton Township, MI · Member since 2015 · 678 posts · 259 votes
    2y
    Quote from @Kevin S.:

    @Owen Rosen

    Thanks for the caution.  Now, could you provide suggestions in her case or other case scenarios?  


     I really can't.  I know nothing about her, her finances, or her situation.  Beyond that I'm an insurance professional and provide insurance not legal advice.

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  • Kevin S.
    Member since 2024 · 400 posts · 240 votes
    2y
    Quote from @Owen Rosen:
    Quote from @Kevin S.:

    @Owen Rosen

    Thanks for the caution.  Now, could you provide suggestions in her case or other case scenarios?  


     I really can't.  I know nothing about her, her finances, or her situation.  Beyond that I'm an insurance professional and provide insurance not legal advice.


    You can certainly say something like :If the first property hits $100,000 (or $200,000) equity then you should do so and so. Or it's not a good idea to put more than 'this much' property within one LLC and why. Providing caution without some suggestions rendered the post meaningless.

    3Reply
  • Owen RosenBusiness Member
    Professional · Clinton Township, MI · Member since 2015 · 678 posts · 259 votes
    2y
    Quote from @Kevin S.:
    Quote from @Owen Rosen:
    Quote from @Kevin S.:

    @Owen Rosen

    Thanks for the caution.  Now, could you provide suggestions in her case or other case scenarios?  


     I really can't.  I know nothing about her, her finances, or her situation.  Beyond that I'm an insurance professional and provide insurance not legal advice.


    You can certainly say something like :If the first property hits $100,000 (or $200,000) equity then you should do so and so. Or it's not a good idea to put more than 'this much' property within one LLC and why. Providing caution without some suggestions rendered the post meaningless.

    There isn't a one size fits all rule. Every situation is different. You should consult experts that have information on YOUR situation and the risks YOU face with your assets.

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    1Reply
  • Kevin S.
    Member since 2024 · 400 posts · 240 votes
    2y

    @Owen Rosen

    That, I (all of us) already knew.

    3Reply
  • Darrin CareyPro Member
    Lender · Dayton, OH · Member since 2008 · 1k+ posts · 705 votes
    2y
    Quote from @Account Closed:
    In the event someone wants to sue you, they want money. If there is little money  in the LLC, the attorney won't take the case. There is nothing to collect so nothing to pay him. 

    This myth has been around a long. A lot a suits are more interested in the insurance payout.
    1Reply
  • Mark S.
    Real Estate Investor · Saint Paul, MN · Member since 2017 · 543 posts · 474 votes
    2y

    @Owen Rosen What about the insurance advice is ‘was off base’?

    0Reply
  • Owen RosenBusiness Member
    Professional · Clinton Township, MI · Member since 2015 · 678 posts · 259 votes
    2y
    Quote from @Mark S.:

    @Owen Rosen What about the insurance advice is ‘was off base’?


    1. Umbrella insurance isn't a magical cure all

    2. Equity isn't the only thing that needs protection

    3. Lawyers and plaintiffs don't only go after individuals/businesses with deep pockets

    4. If someone has a 100 home portfolio they should consult attorneys and insurance professionals as that could be quite complex and cannot be answered in a message board post from anyone, including myself.

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y

    @Natalie Stanley

    I know to $1B funds with tons of assets in one LLC

    We have about $60M AUM in one entity

    If they were commercial properties then i would consider some segregation.

    For example last developer I worked with had a campus of 4 MF buildings, office building and retail center. It was 3 different entities for use types as an example

    But 100 single family homes. Some may say one, some may say 100. No right or wrong answer it is what best suits you.

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  • Alice GoodsonPro Member
    Rental Property Investor · Huntsville Alabama · Member since 2024 · 32 posts · 12 votes
    2y
    Quote from @Natalie Stanley:

    How many single family rentals do you all keep in one LLC? I have around 100 single family homes in one LLC. I have heard that I should have an LLC for each home but it seems administratively burdensome to have 100 bank accounts and 100 different tax filings, credits cards, checkbooks, etc... Can others please share how they think about liability exposure in an LLC. There are large investment funds with thousands of single family homes, I can't image they have an LLC for each home.


    Hello Natalie, my attorney advised me to use Series within my LLC. I have one LLC but each property is listed as a Series 1, Series 2, Series 3, etc. My accounts are the same way. I have a bank account for my LLC that is broken down into a Operating Expenses account that all funds enter and bills are paid through the OPEX account but I also have Series 1, Series 2, Series 3, etc bank accounts for the LLC. This breaks up my rents and expenditures for me. It works great and also limits liability to each Series vs. my entire LLC. Hope this helps.

    1Reply
  • Alice GoodsonPro Member
    Rental Property Investor · Huntsville Alabama · Member since 2024 · 32 posts · 12 votes
    2y
    Quote from @Owen Rosen:
    Quote from @Mark S.:

    @Owen Rosen What about the insurance advice is ‘was off base’?


    1. Umbrella insurance isn't a magical cure all

    2. Equity isn't the only thing that needs protection

    3. Lawyers and plaintiffs don't only go after individuals/businesses with deep pockets

    4. If someone has a 100 home portfolio they should consult attorneys and insurance professionals as that could be quite complex and cannot be answered in a message board post from anyone, including myself.


     Hello Owen, on another note LOL! I am in search of a insurance broker to add to my team for my investments. Would you happen to have a recommendation? It would be great if they were in the Alabama area (Huntsville) but not a must,

    Hope to here from you soon. Thanks

    0Reply
  • Jason BottPro Member
    Insurance Agent · Nationwide · Member since 2014 · 2k+ posts · 1k+ votes
    2y

    We have seen clients with large #'s of SFR, 50-500 locations have 10-25 locations in each LLC. In talking with those investors, there wasn't an exact $ amount they were protecting, just trying to mitigate a suit being tied to the entire portfolio. They also had a $2M-$3M Umbrella over each LLC.

    Another angle on this topic, lending may play a part in why investors have needed to use multiple LLCs.. We have seen lenders request a group of properties moved into a new LLC when refinancing. They are looking to leave behind any unrealized liabilities tied to the past LLC.

    1Reply
  • Kevin S.
    Member since 2024 · 400 posts · 240 votes
    2y

    @Jason Bott. Thanks. Never realized lender would require LLC but it makes sense given the size of portfolio. I assume the umbrella coverage has to equal or exceed the equity of all the property within that LLC?

    0Reply
  • Jason BottPro Member
    Insurance Agent · Nationwide · Member since 2014 · 2k+ posts · 1k+ votes
    2y
    Quote from @Kevin S.:

    @Jason Bott. Thanks. Never realized lender would require LLC but it makes sense given the size of portfolio. I assume the umbrella coverage has to equal or exceed the equity of all the property within that LLC?

    Kevin, equity within the LLC, or personally owned property, has no relationship with the limits of Liability/Umbrella you can purchase.  

    I'd also add that I have never seen a suit come through that had the demand relate to the amount of equity in the property.  Lawyers want the quick payout from the insurance policy.

    Hope that helps.
    0Reply
  • Kevin S.
    Member since 2024 · 400 posts · 240 votes
    2y

    That means each property need to be separated in into it's own LLC (if combined initially) once equity reaches a certain amount. Is there a magic number that attorney won't bother to sue?

    Do attorney find a property with loan/debt an unattractive target vs one with high equity?

    If so, should equity not be allowed to exceed a certain amount for that reason?  By that I mean not to have a paid off property ever to make it less attractive.

    If no, then it's insurance money they are after.   

    Is there a way attorney can find out what a property is insured for?  Ironically it seems that the better you are insured the more likelihood of getting sued.   

    0Reply
  • Jason Allen
    Attorney · Columbus, OH · Member since 2023 · 193 posts · 145 votes
    2y

    This all depends on your risk tolerance. While burdensome (and unnecessary most of the time), having each property in its own LLC would provide the greatest protection for your personal and other business assets.

    0Reply
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