Tips For Launching First Airbnb Property & How to Get Property Into LLC

Short-Term & Vacation Rental Discussions
2yFollow

Tips For Launching First Airbnb Property & How to Get Property Into LLC

Charlie Krzysiak
DFW Tx/College Station, TX · Member since 2023 · 11 posts · 13 votes

Hi all!

Background:

I currently am a junior in college who is taking an internship opportunity this upcoming spring with an accounting firm in Dallas. I am currently living in a house in my college town my parents own (My older brother went to the same school, but is now graduated). They pulled the trigger on getting a house because they found themselves constantly paying for costly hotels when visiting and having to pay both of our rent. With the property being vacant almost the entirety of spring and summer 2025 due to my internship, I thought it would be a great opportunity to get experience with Airbnb.

I pitched my parents the idea of having it listed on Airbnb for next spring/summer so we can see what post graduation could look like when it is completely vacant. I pitched the idea of me running the operational day to day to get experience, while they pay the mortgage. We decided on a % and they are stoked because they wanted in the long run this property to be a gameday house for football games etc. I think having the flexibility to choose what weekends my family or friends wants to come into town out weights the consideration of putting a tenant in there full time.

I have researched a bunch of things that come into consideration before starting this and I would love thoughts!


Questions:

- What are the steps to getting a property into an LLC? Will the lender want to change loan terms/rates? Is this allowed until the terms?

- What can I expect with taxes/registering with city/state?

I assume I need to register my property as a short term rental in Texas as well as my city? I have found the proceeds will be taxed at 6% by Texas and 7% by the current city I live in based upon Hotel Occupancy Tax. Upon top of that, federal income tax.

- What new type of insurance will I need?

I assume I will need to get new insurance that will cover and have a clause about short term rental capability? Also I saw online something about umbrella insurance? Are these the same thing?

Hope everyone is doing well and I thank you if you took the time to read this!

2Reply
57 views

Most Popular Reply

Michael BaumPro Member
Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
2y

Hey @Charlie Krzysiak, it isn't hard to get everything setup in an LLC. You will need an attorney. It will most likely trigger the due on sale clause in a standard 2nd home mortgage so read the fine print.

You can always use a commercial loan instead. It will require more down and is usually saddled with a higher interest rate. Frankly and LLC isn't necessary with only one or 2 STRs. Good insurance is a must.

That brings us to the insurance question. You will need a short term rental policy. Not a homeowners or a landlord policy. It is specific for STRs. Proper, Foremost and CBIZ are 3 that write them. You can also check with just about every other insurer out there as a lot now offer STR insurance.

An umbrella policy isn't a stand alone thing. It covers everything above and beyond (up to the limit) on you, your properties etc. It isn't that expensive and can be a good thing in case of a negligence lawsuit.

5m is a good amount.

3Reply
See this reply in the discussion

10 Replies

Jump to latestLatest
  • Allen DuanPro Member
    Property Manager · Los Angeles, CA · Member since 2022 · 590 posts · 463 votes
    2y

    This is a great idea Charlie. Great job setting that vision and getting your parents on board.

    I'm not an attorney our CPA so I can't speak to those issues definitively. You may not need to put the property under a LLC to rent it as STR. Most of our clients have their property in their own name (we do property management for STRs and MTRs).

    Every city has it's own rules for STR permits, whether you're allowed to STR at all, taxes, fees, etc. You can search "[city name] short term rental regulations"

    Yes, you need landlord insurance that specifically covers STRs. We've used Proper Insurance and have a good experience with them. But there are others. I'm not familiar with umbrella policies but I've heard others recommend them as well.

    1Reply
  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    2y

    You Do not need an LLC.

    Moving it could trigger the Due on Sale clause or invalidate the title insurance.

    Just take care of the property and have the correct STR insurance.

    1Reply
  • Michael BaumPro Member
    Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
    2y

    Hey @Charlie Krzysiak, it isn't hard to get everything setup in an LLC. You will need an attorney. It will most likely trigger the due on sale clause in a standard 2nd home mortgage so read the fine print.

    You can always use a commercial loan instead. It will require more down and is usually saddled with a higher interest rate. Frankly and LLC isn't necessary with only one or 2 STRs. Good insurance is a must.

    That brings us to the insurance question. You will need a short term rental policy. Not a homeowners or a landlord policy. It is specific for STRs. Proper, Foremost and CBIZ are 3 that write them. You can also check with just about every other insurer out there as a lot now offer STR insurance.

    An umbrella policy isn't a stand alone thing. It covers everything above and beyond (up to the limit) on you, your properties etc. It isn't that expensive and can be a good thing in case of a negligence lawsuit.

    5m is a good amount.

    3Reply
  • Brooklyn McCarty
    Investor · Member since 2022 · 1k+ posts · 754 votes
    2y

    Charlie, I would really encourage you to read BP's book on STR's. Short Term Rental, Long Term Wealth by Avery Carl. This is going to answer all of your questions and more.

    1Reply
  • Andrew SteffensBusiness Member
    Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
    2y

    You can usually just quit claim the property to an LLC - but you will want to consult your mortgage company and/or an attorney about this prior to doing it. It will likely trigger your due on sale clause. It really is not necessary to have it in an LLC - just have proper insurance including $1M+ liability.

    [email protected]813-563-0877
    Vacation Rentals of Florida53 Reviews
    WebsiteView Page
    1Reply
  • William Anderson
    Rental Property Investor · Mississippi Gulf Coast · Member since 2022 · 206 posts · 168 votes
    2y

    The LLC is created to protect your personal assets and to separate your personal business from your investment business. There are many reasons why it's a good idea to create an LLC and quit claiming your business property to the LLC. Insurance is great and absolutely required but it may not be sufficient if a renter or tenant comes after you.

    I have always suggested that investors go in highly leveraged. While this is still a good strategy if you can afford it, the next best thing it does is to keep the wolves away. Judgments against an LLC with the property that is secured by a mortgage of 80% or more are not likely to attract ambulance chasers.

    Even if you pay cash for the property, create a mortgage for the property through a trust you set up so that the property has sufficient liens to keep the bad guys from your business.  

    You can set up an LLC by going to the Secretary of State's website in the state where the property is located. Create the LLC by paying with a credit card. If you do not live in that state, you will need the services of a registered agent, easy to find online.

    The reason for creating the LLC in the state where the property is located is that you will be permitted to use the courts in that state if you need to initiate litigation. A foreign company can not use state courts unless you create the business in the state or register as a foreign company.

    You will need to create an operating agreement.  You can find samples online.  This is your document.  Most if not all states do not have a mandatory template.  There are some important items to be included but you simply say what you want about who owns want etc.

    Apply for a federal tax ID number online at the IRS site.  Do not be fooled by the fake sites that charge you.  The IRS has no fees.

    You are now prepared to open a bank account.  

    Next, create a quit claim deed to transfer your property to the LLC. You can usually get samples of the format from the County Recorder or Court employee who accepts deeds for recording. Get the document notarized and file it.

    Regarding the due-on-sale clause.  Most finance companies do not recognize the transfer as a sale.  The due on-sale clause requires a sale.  While technically it is a sale, there is a connection to the mortgagor.  I am not offering advice here, check with your mortgage holder to be sure.

    You may or may not want to see an attorney about the above. If you decide to, contact one in the area where the property is located and one that is a "business" attorney. The action of creating the LLC with the state is simple and you should be able to do that without an attorney. Use the attorney to create the agreement and possibly handle the quit claim deed.

    1Reply
  • Terri-Leigh H.
    Interior Decorator · Denver · Member since 2022 · 119 posts · 47 votes
    2y

    Awesome Charlie, that first one is so exciting. I think you'll get a lot of great advice here! If you need any feedback on design/furnishing, especially something that screams GAMEDAY! and commands top dollar, reach out.

    - TL

    0Reply
  • Tom Albares
    Member since 2022 · 12 posts · 15 votes
    2y

    You don't need an LLC. You can get short term rental insurance with many carriers. I use Proper Insurance. You may also want a +1M dollar umbrella policy to cover any liabilities.

    0Reply
  • Sarah KensingerPro Member
    Real Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
    2y

    The best people to help you with all your questions and get the right entities set up for your specific needs, would be Anderson Business Advisors. Definitely worth the money and education to get things how you need them and avoid unnecessary taxes! 

    [email protected]330-557-3021
    0Reply
  • Jeremy HoldenBusiness Member
    Real Estate Agent · Scottsdale, AZ · Member since 2021 · 156 posts · 90 votes
    2y

    Hey Charlie, im an agent and investor in the phoenix who own his own airbnbs. Feel free to shoot me a dm and I can help you in the right direction. 

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free