is an LLC necessary?
Brandon MorganPro Member
Member since 2023 · 132 posts · 144 votesis an LLC necessary?
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
1yAn LLC is useful for two things: anonymity and legal protection. In most cases, neither is warranted.
Warning: I am not an attorney, and this can be a complicated topic. Please note the information provided below is a layman's definition designed to provide a basic understanding for the general audience. You should consult an attorney or CPA for your specific situation.
ANONYMITY: When you create the LLC, your name is recorded on the documents and published on the Secretary of State's website for all to see. So you're not completely anonymous. If you want to be completely anonymous, you can use a Registered Agent. The Registered Agent will record the documents on your behalf so only their name and information appear on the documents. I've done this with my properties because I'm well known in my small town and don't want people to know what I own.
LEGAL PROTECTION: By placing your assets in an LLC, you are legally separating them from your personal assets. If someone injures themselves and sues, they will be suing the LLC and not you personally. If your insurance coverage isn't enough, they could seize the LLC assets, but not your personal assets.
Additional thoughts:
1. An LLC is not free. You can spend as little as $100 to form an LLC, or you could use an attorney and spend $1,000 or more. There are also additional costs of operating and maintaining an LLC, like separate bank accounts, annual report filings, tax filings, etc.
2. There are rules to follow! If you fail to follow the rules, you may open your personal assets to a lawsuit. An example of this would be mixing your personal money and LLC money in the same bank account.
3. You do not need a separate LLC for each property or a series LLC! Don't make your life more complicated than it has to be. Most professionals will recommend a separate LLC for every $1 million in assets but I don't think that's necessary. In my case, I have residential rentals in one LLC, commercial properties in another, self storage in a third, and my real estate company operates in a fourth. Some have more than $1 million in equity while others have less.
4. The need for an LLC is grossly exaggerated on BiggerPockets and other websites. Have you ever heard of a Landlord being sued by a Tenant and losing property? I've been on this board since 2010 and haven't found an example yet. You've probably heard of big Landlords losing property, but only because they were flagrantly violating Fair Housing, running a slum, or otherwise violating the law in an egregious manner. You are more likely to be struck by lightning twice. The vast majority of lawsuits against Landlords are for wrongful eviction, security deposit disputes, and Fair Housing Violations. Your primary insurance policy with $300,000 in liability coverage should be sufficient in 99.999% of all lawsuits.
5. The best protection for you and your investments? Know and obey the law. I manage around 400 rentals with 14 years of experience and have never been sued once. Even if I were sued, I document everything and obey the law, so I won't be found guilty. Even if I were found guilty, the cost would be in the thousands, not in the millions. Insurance would cover it, I would pay the deductible, and no assets would be lost.
If you are in an area like San Diego where people are more likely to sue, a judge is more likely to find you guilty, and the payout is expected to be higher, you may consider an umbrella insurance policy. This policy will provide additional coverage above what your existing policy covers. It's easy to obtain, costs very little, and doesn't require extra, on-going effort to maintain.
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66 Replies
- Member since 2024 · 2 posts · 2 votes1y
I'm new as well congratulations on you're first property me and my fiance was going to start a real estate business but she has cold feet so i already have a LLC she the one who has the 820 credit score and I'm getting mine back in order we both have one property each i just loss my contract for my business so I'm thinking about using the equity from my home or turn my home it a bordering house just need some mentoring
- Member since 2024 · 1 post · 0 votes1y
Do any of these answers change if the investor is buying cash?
- Member since 2025 · 2 posts · 1 vote1y
I would never do anything like real estate or even software without an LLC. It's def needed IMO!
- Memphis, TN · Member since 2023 · 100 posts · 24 votes1y
I'm a little late to the party here, but whether or not to get an LLC is something many real estate investors consider, and it often depends on your specific goals and circumstances. You may not feel the need when you own just 1-2 properties, but it may be more relevant if you plan to expand.
LLC's separate your personal assets from your investments and offer you protection from lawsuits related to your property, they can help to establish a more professional image if you plan to expand, and they provide some flexibility on how you are taxed.
There are some drawbacks, included fees and administrative work, but it's ultimately best to consider speaking with a CPA to determine the best option for you.
Good luck and hope to hear more about your success!
- 1yJonathan SmallPro MemberInvestor · Suwanee, GA · Member since 2020 · 182 posts · 151 votes
@Brandon Morgan
An LLC isn't always necessary, but it can be a smart move for liability protection and separating personal and business finances. If you're just starting out or doing small-scale deals, it might not be urgent. But as you grow, it's worth it for peace of mind. Always good to chat with a CPA or attorney to see what fits your situation!
I personally would put my properties in a LLC. This gives me legal protection as well as tax deductions. @Chris Seveney makes a good point that you need to consider if the loan and insurance is in your personal name or your LLC. You don't want to give the insurance company any reason not to pay out on a claim. You defiantly want legal protection as stated by @Max Wilhite
@Jonathan Bock is correct about keeping it simple. It is easier said than done. @Bill Hampton it seems we are both in Georgia. I look forward to connecting.
@River Sava is correct that a LLC makes it easier to scale. Investment bankers are usually looking to lend to a LLC vs an individual.
@Jonathan Chan how much in insurance to you recommend for 1 rental? How do you see this coverage increasing as he scales?
@Sarah Brown how many properties do you put in each LLC? How do you determine when to create another LLC?
@Ashish Acharya I have found that I get better terms for personal loans. However, it is a lot more complicated to get a loan in my personal name vs my LLC. DSCR loans are pretty straight forward for my LLC. I have to provide 5 times the documentation to get a house in my personal name. - 1yAdrian Lammersdorf-SciollBusiness MemberRealtor · FL · Member since 2020 · 234 posts · 101 votes
Quote from @Chris Seveney:
@Brandon Morgan
If the loan is in your name I would not put it in LLC I would just a good insurance policy.
That’s what I would do and have done
I 100% agree with this. I got scammed into buying an LLC the company scared me, and I regretted it and ended up going the insurance route. I only own 2 properties that are rented out at the moment. LLC's are for when you have a lot more equity/properties.
Thomas Lynne Realty528 Reviews - Member since 2023 · 6 posts · 0 votes1y
Where can I find a list of hard money lenders
- Lender · Clermont, FL · Member since 2020 · 168 posts · 87 votes1y
Quote from @Jonathan Small:
@Brandon Morgan
An LLC isn't always necessary, but it can be a smart move for liability protection and separating personal and business finances. If you're just starting out or doing small-scale deals, it might not be urgent. But as you grow, it's worth it for peace of mind. Always good to chat with a CPA or attorney to see what fits your situation!
I personally would put my properties in a LLC. This gives me legal protection as well as tax deductions. @Chris Seveney makes a good point that you need to consider if the loan and insurance is in your personal name or your LLC. You don't want to give the insurance company any reason not to pay out on a claim. You defiantly want legal protection as stated by @Max Wilhite
@Jonathan Bock is correct about keeping it simple. It is easier said than done. @Bill Hampton it seems we are both in Georgia. I look forward to connecting.
@River Sava is correct that a LLC makes it easier to scale. Investment bankers are usually looking to lend to a LLC vs an individual.
@Jonathan Chan how much in insurance to you recommend for 1 rental? How do you see this coverage increasing as he scales?
@Sarah Brown how many properties do you put in each LLC? How do you determine when to create another LLC?
@Ashish Acharya I have found that I get better terms for personal loans. However, it is a lot more complicated to get a loan in my personal name vs my LLC. DSCR loans are pretty straight forward for my LLC. I have to provide 5 times the documentation to get a house in my personal name.I would talk to multiple insurance agents to get their recommendations because a lot depends on what he has in assets.
- Investor · Prescott Valley, AZ · Member since 2017 · 27 posts · 13 votes1y
Great information! We're going through the same thing now.
Silly question here but just to confirm.....if you transfer a property from your name to an LLC does the LLC become the new borrower on the mortgage or does it stay in the individuals name?
Quote from @Bill Hampton:
An LLC will not reduce your taxes. However, an LLC can be used to open a business bank account. A business bank account can be used to separate your business income and expenses from personal income. This also helps with asset protection, monthly bookkeeping and annual tax return preparation.
Good luck.
- 1yClint CoonsBusiness MemberReal Estate Attorney · Tacoma, WA · Member since 2009 · 38 posts · 55 votes
Alex,
The mortgage remains in the borrower's name, so it's crucial to avoid triggering the acceleration clause when transferring a property into an LLC. In some cases, this may not be a concern if the loan is owned by Freddie Mac or Fannie Mae. If that's not the case, consider using a land trust as an intermediary to safely transition the property into an LLC.
Anderson Advisors4.7627 Reviews - Real Estate Lender · Newport, RI · Member since 2014 · 182 posts · 33 votes1y
Brandon, you would not be able to do any type of conventional financing with the loan closing in an LLC. However, most people switch it to an LLC after they close which the lender could call the note, but the reality is they usually never know. Your best bet is a Non-QM loan like DSCR or a multitude of other programs that will use normal guidelines but allow the loan to close in an LLC
I recently retired and I'm looking to start a buy/flip business. My career was in construction management for new build and renovation of hotels. Before that I worked for one of the largest residential developers in the Atlanta area. I'm well versed in the industry but this will be a new endeavor as an independent. I have started an LLC and I have a lender that has focused in the residential markets for over 30 years. Same for my accountant and attorney.
I'm thinking about using the 203K method to buy, renovate and sell within a 6-8 month window from purchase. I'm debating whether to buy a lower end property in a marginal area, but would consider a higher end product if the price is right, the renovation cost are reasonable and the increase in market value warrants the purchase (which would also be the case for a lower end product but at lower price points). If anybody has tried this approach, any advise for a first time investor would be appreciated. I'm in the Atlanta area and there are multitudes of opportunities throughout metro and we're a relatively stable market.
The gap I have in my team development is a source for finding the right product in desirable markets around the Atlanta area.
I have found a house in an adjacent neighborhood that has been vacated for some time. I have researched the house ownership trail and the same people have owned the house since 1983. There appear to be local owners with what appears to be children in California and Rhode Island. I would like to try and do an off market deal with them using the Real Estate attorney I'm using. I do have addresses for the children. The parents (or original owners) address is the same as the subject property. However nobody appears to reside there. This house appears to need several serious repairs and/or upgrades. The neighborhood is in a great area and houses are appreciating along with the market.
Any advise anybody is willing to lend related to the best manner in which to contact all the people listed on the research report I have, or related to engaging the 203k program I'm trying to start would be appreciated.
- 1yClaudia BucheggerPro MemberReal Estate Agent · Columbus, OH · Member since 2023 · 17 posts · 33 votes
For basic, low-cost liability coverage, start with an umbrella policy.
For long-term investing and better asset protection, set up an LLC—especially if you own multiple rentals or want to grow your portfolio. For maximum protection, use both.
Many real estate investors use both:
An LLC to hold title and protect personal assets from property-related liability.
An umbrella policy to extend protection in case of larger claims. - Member since 2024 · 7 posts · 12 votes1y
Thanks Steven. I will look into Springfield, MO.
- Rental Property Investor · East Providence, RI · Member since 2018 · 1k+ posts · 1k+ votes1y
I will say the same thing about properties in LLCs as I would say with flossing your teeth.
Only do it to the ones that you want to keep.
The more assets you have, the more you will want to protect them. - Flipper/Rehabber · Bloomfield CT · Member since 2020 · 1k+ posts · 409 votes1y
I flip in my own name and do not use an llc
- Flipper/Rehabber · Bloomfield CT · Member since 2020 · 1k+ posts · 409 votes1y
I posted on this in the success section. Recommend you take a peak at it
- Investor · Member since 2026 · 5 posts · 6 votes1w
Where is the success section?
- Specialist · NJ · Member since 2022 · 1k+ posts · 656 votes1y
As you see, you'll get varying answers. Necessary? No. You can definitely buy an investment property under your name and sell under your name. Lots of people do go conventional and then put up the rehab money themselves and carry the project to the point of a 30yr refi where they hope to get all their money back and then some.
Why do ppl put properties in LLCs?
1) Protection. The LLC shields the individual and their property from any lawsuit or claim. How often do these situations rise? Not often at all, but legally ppl like to protect themselves. Some do a new LLC for each property.
2) The HML sector requires it. They are business to business lenders. Not Business to Individual.
- Specialist · NJ · Member since 2022 · 1k+ posts · 656 votes1y
As you see, you'll get varying answers. Necessary? No. You can definitely buy an investment property under your name and sell under your name. Lots of people do go conventional and then put up the rehab money themselves and carry the project to the point of a 30yr refi where they hope to get all their money back and then some.
Why do ppl put properties in LLCs?
1) Protection. The LLC shields the individual and their property from any lawsuit or claim. How often do these situations rise? Not often at all, but legally ppl like to protect themselves. Some do a new LLC for each property.
2) The HML sector requires it. They are business to business lenders. Not Business to Individual.
- Member since 2025 · 4 posts · 3 votes1y
You can have 10 rental homes per person living in your household. Use a large insurance policy
- Lender · OK · Member since 2024 · 46 posts · 11 votes1y
@Brandon Morgan Congratulations! I help fund deals I’d like to connect with you and discuss how we can work together!
- 1yTerrance HillPro MemberRealtor · Memphis, TN · Member since 2010 · 425 posts · 117 votes
Hi Brandon,
Congrats on getting your first property rented—that's a huge first step! An LLC can help with liability protection, but many investors (myself included early on) started buying in our personal names and used strong insurance + umbrella coverage for protection. The reason is that most lenders won't finance small residential deals directly in an LLC. Once your portfolio grows, or if you move into larger multifamily/commercial, that's when an LLC (or series LLC) becomes more practical. For now, focus on building equity, managing the property well, and learning financing options—you can always shift properties into an LLC later with the right legal/tax advice.
- 1ySean O'KeefePro MemberCPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 871 votes
Quote from @Brandon Morgan:
hi all, I am new to real estate investing and recently bought my first property a few months ago and got it rented out! I am thinking about the future and how I will purchase properties in the future. I often hear you should get an LLC to protect yourself in case something goes wrong. is that only useful if you have a large portfolio? is that worth looking into right now as I am only in the beginning of my journey? open to any suggestions, insights or past experiences.
@Brandon Morgan Welsome!
"Have you ever heard of a Landlord being sued by a Tenant and losing property? I've been on this board since 2010 and haven't found an example yet."@Nathan Gesner here's your first example, and a great post with different perspective on the question of LLC or not, that don't nessesarily align with Nathan's: https://www.biggerpockets.com/forums/548/topics/1257411-shou...
If you get sued, maybe @Nathan Gesner will be willing to pay your legal fees and the settlement if it exceeds umbrella insurance?
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This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.
- Specialist · Member since 2025 · 483 posts · 270 votes1y
Congrats on the first win. Early on, keep it simple: hold in your own name, carry strong insurance plus an umbrella, and focus on clean operations that avoid liability in the first place. Closing in your name usually gets better loan options and less headache; you can revisit LLCs once you’ve got a handful of doors and a clear strategy, or if a lender/product requires it. If you’re uneasy, do a quick consult with a local attorney/CPA, but don’t let entity setup stall momentum. Keep buying solid, boring cash flow and build reserves.
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