Rental Property Investor · Dallas, TX · Member since 2020 · 12 posts · 3 votes
So I've been thinking to myself if I should get an LLC or not? For my rental property investments in the future. Wanted to know if anyone has ever done that? And the pros and cons If any. Thank you so much.
Rental Property Investor · Cincinnati, OH · Member since 2020 · 870 posts · 823 votes
6y
@Vernon Johnson Best practice would be putting your investment in and LLC. As @Account Closed stated this protects you from someone coming after your assets by separating them. Also, forming an LLC gives you the benefit of pass-through taxation.
Here is a BP blog that gives you a deeper dive of the pros and cons:
Real Estate Agent · Las Vegas, NV · Member since 2020 · 41 posts · 41 votes
6y
An LLC will protect your personal assets. If you have rental property under your LLC and a tenant sues you, for any reason, the liability would be limited to the LLC assets and not your personal assets. I believe there may be some exceptions and you would need to consult your attorney. This provides a separation between your personal assets and your business assets. Without an LLC all of your assets would be combined and liable to lawsuits.
Rental Property Investor · Cincinnati, OH · Member since 2020 · 870 posts · 823 votes
6y
@Vernon Johnson Best practice would be putting your investment in and LLC. As @Account Closed stated this protects you from someone coming after your assets by separating them. Also, forming an LLC gives you the benefit of pass-through taxation.
Here is a BP blog that gives you a deeper dive of the pros and cons:
This comes up a lot, if not daily on BP. Many, like myself, just use our personal names and buy insurance including an umbrella policy. Its really a matter of your risk tolerance and personal situation. So, talk to a qualified professional or two.
Understand that with a legal entity like a LLC, you need to maintain its corporate veil to reap its asset protection benefits. This means no co-mingling of funds and running it like a separate entity as opposed to your alter-ego. LLC's are not eligible for conforming residential loans. So, you will have to obtain commercial financing which has a higher interest rate and generally less appealing terms. If you try to take or more Title to your name to get the cheaper residential loan, then in my layman's opinion that is making the LLC an alter-ego. Meanwhile, once you move the Title back into the LLC, who pays the mortgage? The mortgage is under your name but rent should be being paid to the LLC. The mortgage is backed by the property, but the property is owned by the LLC. How do you avoid co-mingling...???
Be very careful how you operate when using a LLC. You have to use it as its own entity to maintain the corporate veil otherwise you'll have a nasty surprise when you get your first lawsuit.
Real Estate Agent · San Antonio, TX · Member since 2017 · 814 posts · 466 votes
6y
Depends, if you are planning to own a property (no lineage/no mortgages) then it may be worth looking for one. If your concern is liability risks, a good insurance will provide almost the same liability protection etc. Many insurance companies (or good ones) will set up an umbrella policy that will cover all your properties for a discount price.
Rental Property Investor · Gulfport, MS · Member since 2018 · 113 posts · 133 votes
6y
I’ll kick this dead horse I guess...
I don't have an LLC and instead I got a good umbrella policy. LLC's do have benefits if you set them up and manage them correctly, but more often than not they can be pierced. Additionally, loans to an LLC are difficult and transferring property to an LLC from your personal name has some risk related to the loan being called. These are acceptable risks to take for many. Ultimately it ends up being a personal preference.