One major problem with owning rental real estate is liability. People can sue you for any reason — or none at all. If you hold title to your real estate personally you could lose everything. That’s why most real estate investors create limited liability companies (LLCs) to hold title to each of their properties. At worst, they might lose one property in a lawsuit but likely not all of them.

However, it's not cheap to create and maintain an LLC. You can form one yourself, but you'd better know what you're doing. If you miss something and are sued, the other side may be able to have the LLC thrown out and attack your personal assets.

Then there's the considerable workload and expense of filing taxes for each LLC, a multi-step process. If the LLC has only one member it is considered a "disregarded entity" and the member files a Schedule C with a personal federal income tax return. If the LLC has two or more members, it must file Form 1065 and a Schedule K-1 for each member with the IRS. In turn, each member must file an individual Form 1040. The LLC might be required to file and pay other taxes as well such as unemployment tax, property tax and state taxes. (An LLC also has the option of filing as a C Corporation.)

Because of the hassle and cost to create and administer many LLCs, some investors put two or more properties into the same LLC. They know they are taking a risk by exposing more than one property to litigation, but they reluctantly decide it's worth it to avoid the headaches of having numerous LLCs.

I recently bought several rental properties from an investor. Instead of creating LLCs for each, I used a relatively new vehicle called a Series LLC, a.k.a. SLLC. It's so little-known, at least in my area (Deep In The Heart Of Texas), that the title company had never heard of it.

Read the rest at http://tinyurl.com/series-llc