Pros and Cons on Running your rental property as an LLC

4 Replies

I own 1 rental property and was wondering if I should put it on LLC. Just wondering what are the pros and cons or if its even necessary. Thanks in advance!

The answer to this depend mainly on what other assets you have. If you have significant assets to protect aside from the property, it might be worth it. If your rental property is your main asset, it might not be worth the added expense that is imposed, particular in California.

The main pro, of course, is that you are afforded certain legal protections and (potentially) favorable tax treatment with an LLC. The main drawbacks are compliance requirements, franchise / business taxes, and potentially higher costs to finance/insure properties.

When we started out we were putting our units an LLC. Than I found out it was an awful idea because

  • violated the mortgage (not a big idea now but gave mortgages a reason to come after you in a couple of years when rates were higher)
  • no seperation- we self managed so we were unable to hide behind the llc, had we not been managing it, it would have been different
  • Hard to get a Umbrella Policy- If it is under an llc you needed to have a cooperate policy much harder.

Honestly we just have all of our houses under our personal name. We have a large umbrella policy.

Originally posted by @Elizabeth C.:

When we started out we were putting our units an LLC. Than I found out it was an awful idea because

  • violated the mortgage (not a big idea now but gave mortgages a reason to come after you in a couple of years when rates were higher)
  • no seperation- we self managed so we were unable to hide behind the llc, had we not been managing it, it would have been different
  • Hard to get a Umbrella Policy- If it is under an llc you needed to have a cooperate policy much harder.

Honestly we just have all of our houses under our personal name. We have a large umbrella policy.

 This is what I've been hearing as well. What structure should I use if I want to keep my identity private? I don't want tenants knowing that I am the owner since my property is worth many millions and I don't want to attract attention from criminals. I want them to think I am just the manager.

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