Buy property in personal name or LLC?

Question

I have recently set up and LLC and am going to be buying 2-3 rentals withing the next 6 months. I currently have none as I have sold the single duplex I had. I am wondering what, if any drawback would be of buying the property in my LLC? I know the benefits but was unsure of any potential downside.

Chris Virgil-Stone · Answer

Thank you everyone. Good point @Russell Brazil. I had read this before but it had skipped my mind. Account Closed That is one thing I was unsure of is the insurance policies and what they would cost for an LLC vs private investor. I'm thinking I will put the properties in my name for now and see about transferring in the future. I put in an offer on one today and will put an offer on another tomorrow. Wish me luck :)

Ken M. · Answer

@Russell Brazil , I like your direct to the point style!  Question,  I recently bought my second house and rented the the other via house hacking. I am now thinking of the next move and how to buy another with the benefits of personal residence financing? I work a full time job with a decent income, and have a down payment.  I am looking for advice on how to purchase without it being my "primary residence"? I am looking in the area within 60 miles.

Thanks in Advance!

Ken

Russell Brazil · Answer

The financing available for commercial lending are far worse than conventional personal lending. So the downside is in the financing. You will have a higher interest rate that is likely adjustable, and a shorter amortization.

Tyler C. · Answer

I am in the same boat but think I will just go with an umbrella policy.  Many banks won't lend if it's under an LLC, and if you put it in your name first and then create your LLC, you need to be careful of the Due on Sale Clause.  (see https://www.biggerpockets.com/forums/311/topics/183825-due-on-sale-clause-was-called-by-bank)

Thomas S. · Answer

Many banks still require the mortgage/loan to be guaranteed by the individuals. This makes the added tax costs of a  LLC unnecessary provided the owner is well insured.

LLCs by themselves do not protect the individual from law suits. Directors of LLCs are commonly targeted in suits.

Nancy Curran · Answer

you have to do separate tax preparation with every LLC. I hate that.