LLC vs Indivials Name

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  • Greg ScottPro Member
    Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
    3y

    I would have different answers for commercial properties.  For residential SF, duplexes, triplexes, or quads, this is my (non-lawyer) experience

    Pros for in your name:  1) Easier  2) Access to better financing  3) You don't have to worry about due-on-sale clause

    Cons for in your name: 1) Extra liability exposure if any claim exceeds your insurance liability coverage 2) Lots of phone calls from people trying to buy your rent property 3) Lots of phone calls from people trying to buy your rent property

    Pros for in an LLC 1) Theoretically unlimited liability protection from the property in the LLC if it is manage correctly 2) Greater potential for anonymity if you are willing to incorporate in certain states and pay for Resident Agents 3) It feels cool to have a company

    Cons for an LLC 1) 50% of people don't do it right so they really have zero LLC protection 2) It costs more, both in terms of financing and annual fees (if you do it right) 3) LLCs provides your asset no protection against something YOU might do (like crash a car) while umbrella insurance can provide protection for you from your property and for your property from things you might do.

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  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    3y

    Buying in your LLC will build your business credit and will start the road to being qualified for commercial loans. It is also easier for recordkeeping.

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  • Brett Deas
    CO · Member since 2022 · 588 posts · 426 votes
    3y

    You can always quitclaim it into an llc later. IMO the only plus for putting it into an llc early is for business credit, otherwise the legal protection is not as much as people think and your landlord insurance should cover almost all issues that come up. 

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  • Ted Schirm Jr
    Lender · Member since 2023 · 8 posts · 2 votes
    3y

    WIth an LLC you are limited to where you can get financing as conventional financing won't allow it. Some people switch the title over to an LLC after getting financing but there have been cases that the investor will find out and call the note due (does not happen with any great frequency but has been known to happen) There are options, like a DSCR loan, without going to a full commerical lender and closing the property in an LLC and save on a lot of the costs (environmental study for one). If you are intersted in having a chat shoot me a message.

    I have worked with a number of people who BRRRR and we have come up with long term plans to make sure not only the first deal has gone well but everything is set up for the next one.

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  • Andrew SyriosPro Member
    Moderator
    Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
    3y

    I would generally advise an LLC for liability reasons. The only exception is that you can only get Fannie/Freddie loans in your own name (and FHA if you're buying yourself). So if you intend to get those loans, I would buy in your own name (you can transfer them into your LLC but that technically triggers the due on sales clause so there is a small risk there), but otherwise I would use an LLC.

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Mustafa Erden

    Business credit for owning rentals does nothing for you. Banks won’t lend for investments they lend for active businesses, so doing it to build business credit is a farse

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