Investment Portfolio Strategy - LLC and Tax

[Nicholas Sanchez]

I am looking for assistance on how to go about asking questions related to my own personal investment portfolio (two condos and one multifamily home in Chicago), as well as how to structure myself moving forward as I am starting to get in the market for a next multifamily purchase. I went more of the house hacking route to start my investing so I purchased my three properties under my name. So, I want to determine the process of potentially creating an LLC for them and going forward as I purchase new properties. Some of my initial research has pointed to work with real estate attorneys and tax CPAs - I am wondering if this seems accurate to anyone who has gone through this process or if you have any suggestions to aide in my search.

[Dylan Brown]

@Nicholas Sanchez you're asking the right questions at the perfect time. The jump from house hacking to portfolio building is where proper structure starts to matter.

As a CPA who works almost exclusively with real estate investors and syndicators, I’ll add a few high-impact points to complement what others have said:

1. LLC ≠ Tax Strategy
   The LLC is a liability protection tool. From a federal tax perspective, a single-member LLC is disregarded (everything still flows to your 1040), and a multi-member LLC files a partnership return (Form 1065). The LLC itself doesn’t reduce taxes—it just helps you separate business from personal, which is crucial as you scale.

2. Refinancing & Lender Implications
   Transferring properties into an LLC may trigger the due-on-sale clause (though this is rare in practice). It doesn’t always happen, but it’s a real risk to understand before moving title. A land trust can sometimes be a workaround, but it’s not a substitute for a long-term plan.

3. Entity Planning for Scaling
   If your goal is to buy and hold long-term, you might consider a holding company (e.g., an Illinois LLC or an S-Corp parent) and separate property-level LLCs beneath it. This helps centralize your management, simplify accounting, and isolate property-level risks. It also makes partnerships, cost segregation, and passive loss planning much cleaner.

4. Depreciation & Strategic Tax Planning
   You’ll want a CPA who’s thinking in terms of grouping elections, material participation, and maximizing depreciation through cost seg. These strategies are how investors legally offset six-figure incomes with paper losses from real estate (or at least optimize their loss timing).

Your next step is absolutely to engage a real estate-focused CPA and a Chicago-based RE attorney who understand both liability protection and how to keep your tax filings clean. Don’t skimp on these two—when done right, it’s not a cost, it’s an investment.