I currently own an out-of-state investment property held within an LLC. I'm now in the process of purchasing a second property in that same state and I'm weighing my options.
I’d love to get your perspective on two different approaches:
Option A: Create a brand new LLC for the second property to keep the assets completely separated.
Option B: Group both properties under the existing LLC for simplicity and lower administrative costs.
For those of you scaling your portfolios, how do you balance asset protection versus book keeping simplicity? Is there a "magic number" of units you hit before you decide a new entity is necessary?
Looking forward to hearing your experiences and advice!
Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
8mo
I personally would not. Firstly, I can use the first LLC up to about a million of value. Second, I have a Texas series LLC, so a master LLC and a bunch of smaller ones. I have to file taxes for each of those LLCs, and they have one small house in each one. Lending is more of a challenge with the entities, too.
If I were to start again, I would get 10 conventional loans in my name and 10 conventional loans in my husband's name. Maybe do the entity for DSCR.
Hi Evan — great question! Most investors weigh liability protection versus simplicity. Many keep multiple properties in one LLC when they're starting out to minimize administrative work and costs, then create separate LLCs as portfolios grow or risk exposure increases. There isn't a hard "magic number," but when a property's value or rehab risk rises, or you're adding more partners, separating assets often makes sense. Having a good attorney and accountant guide this early can save headaches down the line.