How to structure short term rental ownership

Question

I own several properties primarily for short term renting in different cities (San Antonio, Tampa, Pittsburgh). They are all in my personal name (deed and mortgage) however I have an LLC that I do business with and files taxes with. My question is should I quit claim all these properties to my one LLC? Should I get new LLC’s for each property? Should I just get umbrella insurance to cover me under my one LLC? Whats the best course of action? And yes I plan on buying more property in 2025 and it may be in a new city/state. I appreciate any advice!

John Underwood · Answer

If it ain't broke don't fix it.

You have a mortgage and insurance. If you want another layer of protection get an umbrella policy.

You don't want to trigger the due on sale clause for a likely low interest mortgage.

Also if you aren't operating your LLC 100% you likely only have a false sense of security.

Collin Hays · Answer

I will second John. Get a good umbrella policy and you should be set.

Erik Estrada · Answer

You will need to speak to a CPA and an Attorney to see what work best for you. One thing you should be cautious about is the lender calling the note due if you do a QCD to an LLC. You will need to speak to your current lender to see if that is something they will allow you to do.

Kerry Baird · Answer

@Andres Triveno, operating the LLC 100% means that we sign contracts and other documents as member or manager of the LLC instead of using our own names, we have a business phone instead of using our personal phone, we have a business checking account for business spend. That also means that we can start building business credit, which does not report on our personal FICO scores.  We don’t co-mingle funds, using business money for personal expenses…we can do owner draws and owner contributions in and out of the business checking account.  Insurance for our properties is a commercial (expensive) policy, in the name of the entity instead of in our own name.  We run our business with a lawyer drafted Operating Agreement. When we make little slip ups, as we might easily do, a lawyer might use those to “pierce the corporate veil” and go after us personally anyway.

Collin Hays · Answer

It sounds like you would sleep better at night by having an LLC.  That beats Ambien.  Do that.

Ashish Acharya · Answer

@Andres Triveno For structuring your short-term rentals:

1. Single LLC: Easier to manage but pools liability risk across all properties. Lenders might require approval for property transfers.

2. Separate LLC per Property: Maximizes liability protection but adds complexity and costs with individual tax filings.

3. Umbrella Insurance: Adds protection for high-cost liability claims but doesn’t fully separate assets as LLCs do.

Recommendation

Consider one LLC per city for balanced liability protection and simpler management, paired with umbrella insurance for added coverage. This approach supports future growth while managing risks effectively.This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

Andres Triveno · Answer

What do you mean by operating 100%? How do you ensure you are doing that?

Andres Triveno · Answer

If its as easy as just getting umbrella insurance why do I see so many single family homes with an LLC registered as the owner? And it looks like its the one LLC for that specific home. Is this just overkill?

Collin Hays · Answer

An attorney is going to want you to get an LCC, and whatever else (s)he can bill you for.

Michael Baum · Answer

Hey @Andres Triveno, this is always a loaded question and there are different answers.

I agree that most often what @John Underwood and @Collin Hays said is correct.

First off, an LLC won't protect you from negligence. LLC's are generally used to protect against contract issues. If you don't allow someone to access the property when they paid to do so, that sort of thing.

Negligence is when you don't make a repair and someone is injured. Loose deck board or stair etc. LLC's give nearly zero protection on that front.

What @Erik Estrada said about your mortgages coming due upon the transfer is a real issue. You need to check with each lender and see if they have the due on sale clause in the wording. Almost all residential mortgages have that wording to be sure. Of course that point is moot if you own them outright.

Get the umbrella. 5m would be good. That should cover any overages that the STR insurance doesn't. I am not sure if you should have a personal umbrella or another type. Remember that an LLC is a pass through entity so you are on the hook regardless.

Finally what you can look into is a Series LLC. Essentially you create a parent LLC with each property in it's own secondary or child LLC. That way each property is protected from each other. So if you have a lawsuit for a fall through a deck board or whatever, they can only go after the one asset and not all of them. At least in theory.

You still need the correct insurance in any case.

The bottom line is that you should chat with an attorney about all of this and see what they advise. I am not an attorney but I have studied this a bit so take it all for what it is worth.

How to structure short term rental ownership

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