Separate LLC for each Rental Property

[Char Silk]

Hi! We are purchasing 3 duplexes (right next door to each other), should we have an LLC for each property or will 1 LLC work?

[James McMurrey]

Speaking from personal experience and not as a tax or legal professional:

Short Answer: One LLC will work just fine.

Long Answer: LLCs are primarily about limiting your personal liability in the event that someone sues you for medical expenses and damage beyond the limits of your insurance. So my strategy is an LLC for every 5 doors that I own (SFH, 1 unit, rental properties). I think it's more of a personal decision each investor has to make. I've known some investors with 15 rental properties in one LLC. I've known other investors that have an LLC for every 1-2 properties (This would be a nightmare if you have 20-30 properties someday. Imagine trying to keep track of 30 LLCs, your CPA is getting a headache just thinking about it haha!) I think somewhere in between is probably the most prudent without causing excessive paperwork and filings.

[Joshua Messinger]

Hey @Char Silk! 

I would talk to your attorney on this one to get some professional insight. But, in my opinion, one LLC should be fine. Otherwise, the real question is how much asset protection do you really want to have? If all are under one then they can all be tied together in a lawsuit but if you have them in separate LLCs then they have the chance of not being tied together.

If you have any other questions please don't hesitate to reach out! 

All the best,

Josh

[Michael Plaks]

Quote from @Char Silk:

Hi! We are purchasing 3 duplexes (right next door to each other), should we have an LLC for each property or will 1 LLC work?

Assuming each unit has 4 rooms (bedroom, living, kitchen, bathroom), you need 24 LLCs: 3 duplexes x 2 units x 4 rooms = 24.  :)

On a serious note, however, the only reason for multiple LLCs (or, actually, even for a single one) is legal protection. Our collective opinion about protecting ourselves from legal liability is worth about as much as our collective opinions about protecting ourselves from Covid or from North Korean nukes. Really, only the opinions of competent experts matter, and for LLCs this would be attorneys. I'm not one of them (luckily).

Bad news: attorneys cannot even agree between themselves about the right setup for asset protection, including on LLCs. My recommendation is to find ONE attorney you like and trust and subscribe to hers/his religion, err, views on LLCs. Avoid seeking a second opinion at all costs, as it's virtually guaranteed to contradict the first attorney. And the third opinion (if you really like wasting money) will contradict both the first and the second.

You've been warned. If you want to see the proof - take at least 3 Tylenols and search this site for "LLC insurance asset protection"

[Alex Talcott]

I have a professional perspective on this, and I'm interested in OKC! You're welcome to message me.

[Basit Siddiqi]

In my opinion - having an LLC for each property is overkill and not required.

Each LLC will require a separate bank account, account number, check book, registered agent, LLC annual fees.

Speak to an attorney and insurance agent with your concerns and go with the route that will allow you to sleep well at night at the better pricing.

[Juan V Lopez]

Hi Char, personally my attorney advised me to create a series LLC for all my properties.

"Investment LLC" is the umbrella company, but "Investment LLC-1," "Investment LLC-2," etc are the series LLCs under it that own the individual properties.

It may seem tedious and unnecessary to create all of these series LLCs, but you need to protect your investments correctly. If you keep all 3 duplexes under 1 LLC and something drastic happens at one of them and you are sued, they could legally go after all 3 properties.

But when properties are owned by an individual series LLC, it limits the access anyone else may have to the rest of your assets.

Protect your assets and reduce your liability. Hope this helps.

[Chris Seveney]

Quote from @Char Silk:

Hi! We are purchasing 3 duplexes (right next door to each other), should we have an LLC for each property or will 1 LLC work?

I would keep it under one LLC if it was my portfolio. As mentioned seperate LLC's, bank accounts, insurance policies for each, every vendor agreement needs to be done 3x. Getting taxes done now is multiple entities wrapping in.

Just my 2 cents, but KISS (keep it simple stupid) is what we like to say.

[Char Silk]

Quote from @Michael Plaks:

Quote from @Char Silk:

Hi! We are purchasing 3 duplexes (right next door to each other), should we have an LLC for each property or will 1 LLC work?

Assuming each unit has 4 rooms (bedroom, living, kitchen, bathroom), you need 24 LLCs: 3 duplexes x 2 units x 4 rooms = 24.  :)

On a serious note, however, the only reason for multiple LLCs (or, actually, even for a single one) is legal protection. Our collective opinion about protecting ourselves from legal liability is worth about as much as our collective opinions about protecting ourselves from Covid or from North Korean nukes. Really, only the opinions of competent experts matter, and for LLCs this would be attorneys. I'm not one of them (luckily).

Bad news: attorneys cannot even agree between themselves about the right setup for asset protection, including on LLCs. My recommendation is to find ONE attorney you like and trust and subscribe to hers/his religion, err, views on LLCs. Avoid seeking a second opinion at all costs, as it's virtually guaranteed to contradict the first attorney. And the third opinion (if you really like wasting money) will contradict both the first and the second.

You've been warned. If you want to see the proof - take at least 3 Tylenols and search this site for "LLC insurance asset protection"

 You are my kind of people.  Thanks for the tip and the chuckle this morning!  I look forward to more of your posts!

[Char Silk]

Quote from @Alex Talcott:

I have a professional perspective on this, and I'm interested in OKC! You're welcome to message me.

 Thank you!  I will reach out to you!  

[Char Silk]

Quote from @Chris Seveney:

Quote from @Char Silk:

Hi! We are purchasing 3 duplexes (right next door to each other), should we have an LLC for each property or will 1 LLC work?

I would keep it under one LLC if it was my portfolio. As mentioned seperate LLC's, bank accounts, insurance policies for each, every vendor agreement needs to be done 3x. Getting taxes done now is multiple entities wrapping in.

Just my 2 cents, but KISS (keep it simple stupid) is what we like to say.

 I love the "kiss" quote!  Thanks for the help!

[Char Silk]

Quote from @Basit Siddiqi:

In my opinion - having an LLC for each property is overkill and not required.

Each LLC will require a separate bank account, account number, check book, registered agent, LLC annual fees.

Speak to an attorney and insurance agent with your concerns and go with the route that will allow you to sleep well at night at the better pricing.

 Thank you so much, I was pretty sure I knew the answer but thought I would ask for help!