Creating an LLC (to do or not do)

[Donald Hatter]

I have just under five rental properties and I understand the legal benefits of creating an LLC (married to a lawyer). I am wondering for those who have an LLC for their rental properties if they are purchasing properties with the LLC or if they are purchasing under their name and then transferring to the LLC? Eager if it is any easier or better to purchase directly under the LLC. Really asking those who have a limited number of properties.

[Clint Coons]

@Donald Hatter It is always ideal to purchase property directly under an LLC to avoid the need for a subsequent deed transfer. However, for most investors, this isn't always a practical option. Unless you are obtaining a DSCR (Debt Service Coverage Ratio) loan or working with a community lender through a portfolio loan, you will likely need to take title to residential real estate in your own name at the time of purchase. These two loan types are among the few exceptions that permit closing directly in the name of an LLC.

Most of my clients initially take title in their own name, then later transfer the property into an LLC or land trust for asset protection or tax benefits. In these cases, the mortgage remains in the name of the investor; however, the LLC typically handles all mortgage payments moving forward.