Stumbled into a mess ....

[Michele B Cagle]

Here is the story, ..... We currently have 5 rental properties with a contract on a vacation rental at the beach.  We started out getting rental properties when our oldest son was about to attend college.  With eleven children (7 biological and an adopted sibling set of 4), we knew that we could not pay for college.  Well, we bought our first condo in TN where we assumed our son would attend college.  We actually live in AL, but both attended a state school in TN.  He received a full ride somewhere else ... TN gave him very little scholarship money.  So we rented it out to our nephew.  It went so well, we purchased a second condo there.  Both have been rented non-stop for years and are doing well.  We purchased another condo in AL where my second child was going to school.  We have had a couple of hiccups there but it also has done very well.  Second son ended up in MS with a AFROTC scholarship. Yep, we built our house of card up another level.  Now I have three in MS .... three kids and three houses.  Non are in LLCs, all are easily rented.  Now we are purchasing a 3/2 condo in PCB, FL.  It will be managed by a professional.  

So here is my question .... I assume it makes more sense to put the condo on the beach in an LLC. Does it make sense to put all of our others into an LLC of their own?

Thanks

[Frank Jiang]

Originally posted by @Patricia Steiner:

Yes, they should all be in an LLC. I wouldn't do it any other way nor would my clients. Here's why:

"An LLC for real estate is an established legal entity that allows investors to purchase and own real estate in such a way that protects them from personal liability. This means that the investor buys and sells real estate, as well as conducts other business, in the name of the LLC, rather than as an individual. In case any outside entities or individuals make a claim, the individuals behind the entity are able to avoid personal liability. In addition, property owners are allowed to establish individual LLCs for each separate property, meaning that they can avoid cross-liability between properties." (End; Fortunebuilders)

An example. Let's say someone is injured on the property and they decide to sue for the moon. The LLC removes all of your personal property and assets from the mix. If a judgement was awarded, only the assets held in the LLC could be attached.

There is no reason to commingle your personal and business assets. The potential liability is too great. As for the tax implication, it's a non-event:

"When the IRS "disregards" an LLC, it means that, although the LLC and it's owner are separate entities (for liability purposes), the IRS "disregards" them and just taxes the LLC however its owner is taxed. The IRS treats the owner and the LLC as one and the same." (End, LLCUniversity)

Some of my clients place each investment property into a separate LLC and others "group" them based on some criteria. 

And, congratulations on that over-achiever family of yours.  Very large - definitely impressive!

All of the things you mentioned are better mitigated by purchasing umbrella insurance, which is a far more important step to take in ensuring personal protection.

In terms of buying the newest condo in an LLC, buying a property in an LLC makes getting a loan on the property orders more difficult.