Do YOU hold rentals in an LLC or your personal name?

23 Replies

Has this topic been beat to death?

Do those of you who are renting out homes/apts/mutli-fam structure your investments to be owned by you personally, or by an LLC which you own?

I earn a pretty decent living outside of Real Estate (where I currently earn nothing). Having a somewhat sizable income, I have accumulated a fair amount of assets in the form of cash, stocks, bonds, and other physical assets. I think sometimes that this may present a target to renters who occupy the types of units that I am investing in. As such, I have major reservations about owning the properties in my name, in the event that a tenant slips and falls, or brings suit for some other problem.

I will be utilizing a property mgmt company for any rental properties that I buy, wherever I buy them. I don't actually want to meet the tenants at all, beyond reviewing their screening process. I will not be the one interfacing with the renters at any point... I already have a full time job.

So, do you use an LLC or some other corporate structure? Why or why not?

FWIW- i already own an LLC for my main working gig, so I'm familiar with that it takes to create and maintain one.

Yes, beaten to death. Bottom line is there is no one size fits all. Those that hate LLC's and those that love em. For some reason those that hate LLCs always say "make sure you have adequate insurance". As if having an LLC negates the need to have adequate insurance. It isn't an either or discussion. You need adequate insurance no matter what route you go to hold title.

Everything we own is in LLC's and about 90% of our client base is the same way. 10% in their personal name.

Originally posted by @Scott M. :

As if having an LLC negates the need to have adequate insurance. It isn't an either or discussion. You need adequate insurance no matter what route you go to hold title.

True, but there is the extra layer of protection if you have a corporate entity.....

Thanks for the replies. Interestingly, my lender says they must have a "living persons" on the loan and the deed. Thus, if I wanted to form an LLC, I would need to be shifted to their primary market, in-house lending rather than a conventional fannie/freddie loan. Unsure what those rates and terms would look like, or how much different they would be from the 3.99% 30yr fixed I've been quoted for non-owner occupied investment prop loan.

Whether or not you hold properties in LLC's or your own name I think the Liability insurance issue is equal-it is really about how much are you willing to lose. Liability insurance is not expensive generally 150 dollars per million. Base your need on your net worth.

Originally posted by @Ishmael Johnson :

@John Morgan how quickly did you scale upwards using your name, is there a wait time before the purchase of the next property?

I bought 6 within two years with my personal name. 4 in one year. 

Hey Ryan,

My CPA has told me that one subpoena will pierce the veil of pretty much any LLc. Wit that being said, utilize debt as protection and maintain a good umbrella insurance policy to combat potential liability. If the properties show debt as an encumbrance, there is less salivating from attorneys vs. if it was recorded as free and clear. 

Hope this helps,

Tim

Originally posted by @Ryan Daniels :

Has this topic been beat to death?

Do those of you who are renting out homes/apts/mutli-fam structure your investments to be owned by you personally, or by an LLC which you own?

I earn a pretty decent living outside of Real Estate (where I currently earn nothing). Having a somewhat sizable income, I have accumulated a fair amount of assets in the form of cash, stocks, bonds, and other physical assets. I think sometimes that this may present a target to renters who occupy the types of units that I am investing in. As such, I have major reservations about owning the properties in my name, in the event that a tenant slips and falls, or brings suit for some other problem.

I will be utilizing a property mgmt company for any rental properties that I buy, wherever I buy them. I don't actually want to meet the tenants at all, beyond reviewing their screening process. I will not be the one interfacing with the renters at any point... I already have a full time job.

So, do you use an LLC or some other corporate structure? Why or why not?

FWIW- i already own an LLC for my main working gig, so I'm familiar with that it takes to create and maintain one.

Yes, this is one of those topics that has been beaten to death here on BP. 50% will tell you its not necessary and 50% will tell you it is. Personally, I pivoted away from BP and did my own research and determined that (considering a worse-case scenario) it was best to put my assets into separate LLCs. Note; my state doesn't allow Series LLCs.

If you do decided to go the LLC route, most people don't understand the breadth of what's involved to make sure you've followed all the "rules" to keep from piercing the veil, and to make sure Title Insurance isn't jeopardized by doing so.

I'm surprised others haven't warned about the Due On Sale clause... which is a warning people state, but isn't entirely true if its a conventional loan. 

Originally posted by @Tim Stuart :

Hey Ryan,

My CPA has told me that one subpoena will pierce the veil of pretty much any LLc. Wit that being said, utilize debt as protection and maintain a good umbrella insurance policy to combat potential liability. If the properties show debt as an encumbrance, there is less salivating from attorneys vs. if it was recorded as free and clear. 

Hope this helps,

Tim

I don't think one subpoena will pierce the veil. LLCs by nature and reason for their existence are designed to do what they were created for as long as you've done everything correctly to keep from piercing the veil. However, what you said about debt is true. A low LTV is a natural defense mechanism because there's not enough meat on the bones for an attorney to go after. However, an aggressive attorney can go after your other stuff if you've not separated it.

Without partners:  Residential property = personal name.

Commercial property = LLC. I have 4.

And god yes, been beaten to death yet I rarely see people mention property type.  My biggest factor. 

Originally posted by @Steve Vaughan :

Without partners:  Residential property = personal name.

Commercial property = LLC. I have 4.

And god yes, been beaten to death yet I rarely see people mention property type.  My biggest factor. 

 Why on Commerical property and not residential?

Originally posted by @Michael Plante :
Originally posted by @Steve Vaughan:

Without partners: Residential property = personal name. Commercial property = LLC.

 Why on Commerical property and not residential?

More liability exposure and higher need for anonymity on my 5+ unit commercial multis.  

Commercial loans and commercial insurance are a given so a commercial enterprise fits well. 

Requiring commercial loans (riskier, higher rate, annual hassles) and to shop harder for proper insurance on houses doesn't make sense for me.  A basic landlord policy will offer me $500k in liability insurance for 10s of dollars a month for a reason.  Low risk.