Collecting Rent on LLC Name or not

27 Replies

Hello there, I am new to buy and hold investing and closing my first property very soon. The house is on my name (not on LLC). My concern is that I don't want a tenant to know my full name and my details that I actually own the house, I would like to act as a property manager instead. Yes I'll be using a P O Box address where they will send a payment (I'll be lucky if they can pay online). In other words, I don't want to use my name on the lease, I'd rather form a LLC and use the LLC name instead of mine. Maryland is not the cheapest when it comes to LLC fees. Is this my fear due to being new. So coming to two questions now. Should I create a LLC that a tenant will write checks to and will that really do anything? Second, if the tenant asks me if I own the house, can I say it's owned by a person who doesn't choose to disclose but the LLC is managing it? Or should I suck it up, mention since day 1 that I am the landlord and not care what they think.

Thank you in advance. 

@Lakshay G.

It's public record you own it, so my vote is to not care what they think. Since I'm in a community property state, I could refer to "my partner" (aka my wife) whenever talking to the tenants. It helps especially if you're managing property and fielding complaints.

Don’t know about Maryland, but in my area is very easy to find who owns the property anyways, and I believe on being straight forward. Don’t know why they should care that you own the house or not.

You don't need an LLC, you can set up a DBA for probably less work and $$ (dunno about MD specifically)

Doesn't really make a difference, your business name can go on the lease, bank account, checks, etc.

Some people will ask, many won't care one way or another. I originally thought it was a big deal, but I haven't found that people really don't care one way or another. As long as you give them what they expect in terms or their place to live, you're pretty much good to go.

@Lakshay G. I am not a lawyer but it may be in your best interest to consult with a lawyer about acquiring the property in Trust. 

personally I preferred to form LLC, due to liablity of renting/someone else is leaving in your house, God forbidde if somebody get hurt in your property you may be liable. I own rental property in MD under LLC. And my tenants direct deposit the payment.

@Mike McCarthy

To DBA there are restrictions on use of corporate or other association designator such as "corporation" or "limited," "LLC." ? Correct

How can you register DBA without above?

Thank you everyone for your input. All were great advises. Yes for MD, you can see who actually owns the property. I'm not sure whether Maryland allows just DBA which isn't attached to a LLC or INC but I will look into it. Thanks again.

@Lakshay G. In MD you as an individual can register a DBA... it's called a Tradename and it can be created with a simple form + payment. You'll need to renew it every 5 years.

As others have said, since the real property is owned by you personally, and that information is public record, your tenants will be able to figure out easily who owns the property they are living in. They can also go and search tradenames on SDAT and figure out who owns the DBA they are paying rent to.

Low bar but some anonymity. Zero liability protection.

We refer to ourselves as the property managers.   It provides a small buffer betweven us and the tenants.  If the tenants ask for something we indicate we need to check with the owners.  If we discuss it and decide against it, the “owners” are the bad guys.  Took the idea from book called something like Landlording on Auto Pilot”.  

We have an LLC and collect the rents in the LLC but in CA the LLC cost is significant ($800/year).

We have an umbrella coverage for liability protection. This is stronger protection and less error prone than an LLC. Protection of personal assets is very important. The umbrella coverage is our chosen method.

We have considered getting rid of the LLC as that is a fair amount to spend just for a name. However, so far, we renew it annually.

Good luck

@sai toll there was no discussion about using the word 'corporation' in the original post.

If all you want to do is 'hide' the fact that you're the owner, create a DBA and have checks made out to that name.

With one house owned in your name, whether you use a DBA, LLC or other form of company, you're not really going change the tax or liability consequences with whatever path you go down. (speaking as neither a lawyer nor cpa - but having done my research)

@Lakshay G. ,

When you register your LLC, you have to put a physical address-- and your name, so if you google the LLC, the state registry will likely be the first thing to come up.. so don't think the LLC will make you hard to find. If you only have 1, I'd say just put in in your name. Most people and tenants aren't out to get you. We only use cozy.co for our payments, and we put our PO box for the address in the contracts, but again-- a simple google search will tell you any LLC information needed, it's not private.

thanks everyone. 

Hmmm. Maybe I am just paranoid, but I consider holding a rental in you name as a huge problem. I have 36 properties in LLC's. If someone has any reason to go to court, I want the LLC to be responsible. I also say that I am the property manager which gives me some separation from the decision makers. LLC makes that more believable. About 9 years ago I was counter sued by a professional tenant. She tried to name me personally, but couldn't because she signed a lease with the LLC. I love my LLC's!!! Good luck.

Let's say you have a requirement that prospective tenants provide pay stubs to prove income, because you prefer that people have stable jobs rather than renting to self-employed people or freelancers. And you explain that to prospective tenants. And a prospective tenant provides those pay stubs, from an LLC. And you later find out that they own the LLC, and are in fact a self-employed freelancer.

Would you feel like they have been honest with you?

If not, then why would you hide behind an LLC in exactly the same way?

Man up, and don't try to deny you own a property.  Mine are in LLCs.  I never say, "Hey tenants, you know I own this house, right?"  But I would certainly never deny it, and I think it is pretty well understood by everyone.

If you do have an LLC, and you expect it to provide you with any protection from liability whatsoever, then you need to actually operate it as an independent entity. Which means, yes, you have the rent check made out to the LLC.

Originally posted by @Lakshay G. :

Maryland is not the cheapest when it comes to LLC fees.

Just form/incorporate your business in another state.  I did mine all online in Missouri it's like $50 or less and its good forever.  

ahh practicing law via Bigger Pockets . . . 

While cheap and even free, not always the best advice . . . please consult an Attorney where the property is located.

Originally posted by @Kim Tucker :

ahh practicing law via Bigger Pockets . . . 

While cheap and even free, not always the best advice . . . please consult an Attorney where the property is located.

In my short time here I've seen many situations "solved" by the collective opinion (if the poster reads carefully enough) without the need for an attorney.

Originally posted by @David Lemley :

Hmmm. Maybe I am just paranoid, but I consider holding a rental in you name as a huge problem. I have 36 properties in LLC's. If someone has any reason to go to court, I want the LLC to be responsible. I also say that I am the property manager which gives me some separation from the decision makers. LLC makes that more believable. About 9 years ago I was counter sued by a professional tenant. She tried to name me personally, but couldn't because she signed a lease with the LLC. I love my LLC's!!! Good luck.

Thank you for your input and I agree with you 100%. There's only one problem. I got a conventional loan on the house that's on my name (Bank didn't or couldn't give a LLC a loan). In your opinion, can I still even use a LLC as the property isn't on LLC name? I have a reference who went to a local bank and was able to get a loan on LLC name and she is a personal guarantor on the loan, I tried this but couldn't make it happen (yet) but my goal is to do this on my next property.

Thanks again. 

Originally posted by @Clint E. :
Originally posted by @Lakshay G.:

Maryland is not the cheapest when it comes to LLC fees.

Just form/incorporate your business in another state.  I did mine all online in Missouri it's like $50 or less and its good forever.  

 What a great tip. 

Originally posted by @Kim Tucker :

ahh practicing law via Bigger Pockets . . . 

While cheap and even free, not always the best advice . . . please consult an Attorney where the property is located.

 Thank you for your input.

Originally posted by @Richard C. :

Let's say you have a requirement that prospective tenants provide pay stubs to prove income, because you prefer that people have stable jobs rather than renting to self-employed people or freelancers. And you explain that to prospective tenants. And a prospective tenant provides those pay stubs, from an LLC. And you later find out that they own the LLC, and are in fact a self-employed freelancer.

Would you feel like they have been honest with you?

If not, then why would you hide behind an LLC in exactly the same way?

Man up, and don't try to deny you own a property.  Mine are in LLCs.  I never say, "Hey tenants, you know I own this house, right?"  But I would certainly never deny it, and I think it is pretty well understood by everyone.

If you do have an LLC, and you expect it to provide you with any protection from liability whatsoever, then you need to actually operate it as an independent entity. Which means, yes, you have the rent check made out to the LLC.

Thank you sir for your opinion. While a completely after with you, if a tenant does take me to a court for a stupid reason, I hope the dive will give me a break because I was a man enough to have the lease documents on my name and not a LLC's. 😀

Originally posted by @Lakshay G. :
Originally posted by @Richard C.:

Let's say you have a requirement that prospective tenants provide pay stubs to prove income, because you prefer that people have stable jobs rather than renting to self-employed people or freelancers. And you explain that to prospective tenants. And a prospective tenant provides those pay stubs, from an LLC. And you later find out that they own the LLC, and are in fact a self-employed freelancer.

Would you feel like they have been honest with you?

If not, then why would you hide behind an LLC in exactly the same way?

Man up, and don't try to deny you own a property.  Mine are in LLCs.  I never say, "Hey tenants, you know I own this house, right?"  But I would certainly never deny it, and I think it is pretty well understood by everyone.

If you do have an LLC, and you expect it to provide you with any protection from liability whatsoever, then you need to actually operate it as an independent entity. Which means, yes, you have the rent check made out to the LLC.

Thank you sir for your opinion. While a completely after with you, if a tenant does take me to a court for a stupid reason, I hope the dive will give me a break because I was a man enough to have the lease documents on my name and not a LLC's. 😀

 No, it doesn't really work like that.  The judge magistrate is not going to give you credit for having the lease in your own name.

Technically, you might not even have the RIGHT to issue a lease in your own name, if the property is owned by an LLC.

I honestly think too many real estate investors attribute magical powers to LLCs.  They are not magic.  And in order to get many of the (fairly limited) number of benefits that they do have, you MUST manage them according to the rules.  Co-mingling of funds is a very bad idea.

For your first few rentals, an LLC is probably not even necessary. An umbrella insurance policy protects you at least as well. But if you are going the LLC route, make sure that you maintain the independence of the entity, and act accordingly.

You can have your rent paid to a company even if the company doesn't own the property. Depending on motivation levels you can refi your building with a local bank that will lend to an LLC. You of course would be the guarantor. It would make me really nervous to be exposed to all that liability. If you have some good equity in the building you can add a line of credit to the refi. Having an available line helps you purchase the next building THAT WOULD BE IN YOU NEW LLC!!!! Have fun and best of luck:)

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