Below is a guest blog post from Steven McDonnough, who is a Financial Consultant that we work with. His article clearly outlines the benefits of owning any rental property in an LLC. Many investors don’t put their properties into an LLC until they own several properties, and for some clients there may be reasons not to, but Steven makes a good case for the need to do so even for just one property. Many of our client’s in the Richmond, Virginia area who use Snipes Properties for property management services, aren’t putting their single family rental property into an LLC because of the perceived extra cost. But, I believe anyone with a rental property should consult their CPA , Attorney or Financial Consultant and find out if the benefits outweigh the extra cost. What are your thoughts? Read the article and leave a comment below. Looking for a good Real Estate Investing Software? Try RehabValuator and RentalValuator. We recommend it to our clients.


Should I Put My Rental Property in an LLC?

Personal v. Entity Owned Real Estate Investment Properties

Investment property is usually defined as real estate that is primarily purchased to buy and sell for a profit in the future or to produce rental income. However, there are several factors to take into account when deciding to purchase an investment property. Understanding the many components of investment property ownership can avoid a lot of headaches down the road. Many investors with real estate investment properties own them personally. A more prudent way to own real estate for investment purposes is to transfer ownership to a Limited Liability Company (LLC). This method not only protects it’s owner-member’s personal assets ; cash, equity in real estate, primary residence, investment accounts, retirement accounts, etc. – from litigation; but it also allows for flexible profit distribution among their members.

Legal Benefits

The primary reason to form an LLC is for the legal protection it offers. If the owner has a personal creditor, the creditor generally cannot make a claim on the property owned by the LLC or other corporate entity. Should any tenants, their guests, or anyone on the property sustain any injuries, and if the property is owned in the client’s name, the owner’s personal assets are at risk. Example: An owner has a rental property that is occupied by a young couple. They have a holiday party and one of their guests falls down stairs and is hospitalized. The guest sues the owner for his injuries, stating the stairs were hazardous. If the guest successfully wins the claim against the owner, any judgment in excess of the liability insurance can be satisfied with the owner’s personal assets.

Tax Benefits

From a tax perspective, an LLC formed with two or more members is classified as a “pass-through” company. A “Pass-through” means its income is passed through to its owners and claimed on those owners’ individual tax returns. Hence, it is subject only to capital gains rates on the ownership shares of the member, and not to corporate capital gains taxes, therefore there is no double taxation. LLCs with just one owner-member, however, are taxed as a sole proprietorship and no separate tax return is required. Actual tax dollars saved from holding real estate in an LLC opposed to personally holding the properties is zero. As of 2011, if you own income property and actively participate in the management of the property and your adjusted gross income is less than $150,000, you can write off up to $25,000 in rental losses. The amount of rental losses that you can write off is proportionately phased out between $100,000 and $150,000. For example, if your adjusted gross income is $125,000, you can write off $12,500 in rental losses in the year of the loss. If your adjusted gross income is $150,000 or more, you cannot write off any rental losses on your tax return in the year of the loss. Also remember that although the loss is disallowed for that particular tax year it is not completely lost. When you sell your income property, you can write-off any unused rental losses that have accumulated while you have owned the property.

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Estate Planning Benefits

The formation of a LLC for the purpose of holding investment real estate has estate planning advantages as well. It allows for the transfer of ownership in the property in a more seamless manner than if personally owned. In many circumstances property owners wish to gift certain percentages of their real estate to children or other family members. For real estate not held in an LLC this process can require many trips to the county courthouse to update deeds that will require changes every time percentages of ownership change. In cases where real estate is owned in an LLC, the owner-members can simply issue membership certificates to the child or family member and no changes need be made to the deed with the county.

Whether you own twenty properties or one, owning them personally can be a major liability. All of your hard work and planning that lead to the ability to own real estate could be wiped out with one misfortune. Hopefully the insight provided in this article has helped you better understand the benefits of forming an LLC and provided you with perspective on the pros and cons of ownership structures when purchasing property for investment purposes.

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  1. JSC

    If I own my rental property under an LLC, and the rental property goes under foreclosure, what does the LLC protect me from? Thank you!

    1. It depends if you signed for the loan personally. Most banks make borrowers sign a personal guarantee even if the property is titled in an LLC.

      1. sam

        as far as i know banks will only give loans to your personally, not your llc

        1. Lenders will make loans to commercial development groups in the name of the entity. These are generally called “Non-recourse Loans” because if the project defaults the owners of the business entity or LLC are not held financially responsible. Generally the group has many years of experience, deep financial backing and the lender has a sophisticated understanding of the project’s likely success. Specifically there are HUD loans (and VHDA loans in Virginia) for large mixed-income multifamily development projects that offer non-recourse financing. Community Banks will give loans without personally signing to businesses that have operating history, long running business credit (or Dun & Bradstreet ratings), but they typically we will want collateral nearly equal to the amount of the loan. For example equipment, inventory or other real estate assets. Also, the SBA has a loan program called 504 specifically for Commercial Real Estate purposes. These loans are generally for businesses to buy buildings, factories, etc. But from the standpoint of residential real estate investors, you are going to have to personally guarantee any property you get a loan for.

  2. Denis L

    If I do not have an LLC, but I already rented one of my properties, is it too late to get an llc?…. if not, what do you suggest??…

    1. Yes, you should be able to put the Title into the name of an LLC at any time. You just need to hire a real estate attorney to change the Title and record it for you. But, if you got the loan in your personal name, it will not provide you with any protection from loan default. But, it can offer some protection in the event that you are sued.

      1. Denis L.

        I think I will be fine not changing any of the title at the moment because it will incur more expenses at the moment.
        My main goal though, is to protect my family and personal assets from any event in which my tenants would attempt to sue me…. in this case, once I get my LLC it will bounce there correct?.

        Also, If I already have a signed contract with my tenants in which reflect my personal name (I did this a few months ago) how do I go about changing that to an LLC? do I break the contract and create a new one?

        Which type of LLC would you recommend if I only have 1 property for rent? Sole proprietorship or Partnership (My wife and I, perhaps)? ….

        THANK YOU very much in Advance!…. you guys are the best!!!!

        1. Your attorney can draft an addendum to the lease that changes the lease to the LLC. In terms of which type of LLC, you might want to check with your Accountant or Attorney. That mostly depends on how you file your taxes. Glad I could help!

          1. it depends on eatxcly how long ago you purchased your current home. FNMA (Fannie Mae) will acknowledge you purchase of the existing home, and in some states it must be over a year ago. Also, most Lenders will require a Comp Rent Schedule on the current home, as well as you would have to have 30% Equity in your current home in order to use if as a rental home with rental income. Maybe you can carry both payments. I work in the industry and it really is different state by state. Good Luck

          2. Jane McDonald

            HI.. If a husband and wife are on a deed of a building that they now want to put in a LLC they are creating and that will both listed as equal members .. Can they put that building into the LLC without changing the deed and incurring the transfer taxes??

  3. Tim Pori

    Hello Steven,
    If I create an LLC naming my self and by brother as owners of an LLC for use as as a pass through entity to avoid commingling of funds but do not actually place the properties in the LLC, will I lose the right to depreciate the property? I plan to ask my CPA to prepare the returns for the year and then my brother and I will each be responsible for our share of the taxes. Because the property is still in my name, I plan to reimburse my brother for the depreciation. Is this possible?

  4. L. Hanf

    I have one rental property that I always have a paper loss on. However, given my income, I cannot take it as a loss on my ordianry income and in fact it’s part of my AGI that subjects me to AMT. If I were to create a LLC or S corp. for that one rental property, could that then show as a zero on my 1040 and avoid the impact that is having as part of my AGI (before deductions) and AMT?

  5. James Stroud

    The article is well written and had plenty of good information. Over the last 18-24 months, I have gone from 1 to 5 investment properties (all in my personal name). I probably should have done it earlier but in terms of Estate Planning and mitigating my risk – I believe I should put them into an LLC (possibly 2). My concern is that when I transfer the houses into the LLC (mortgage company(s) will be notified via lawyer) that the loan may be ‘called-in’ – I need to avoid that. The loans were set up as investments properties. Any thoughts or coments on the likelyhood of the loans being called in?

    1. In my experience the lender does not generally call the loan as long as it is current.

      1. Thomas Phan

        If (only if) the lender call the loan due when property transferred to the LLC, what could be an appropriate action for the owner? Just simple transfer back to owner name to avoid loan due?

    2. Michael Mattera


      I would like some advice from you if you care to help out someone starting out. Currently LLC with 1 property.


  6. Chuck

    Does moving the property into an LLC require a sale and closing? If not, does it come off of my personal credit report if it is in the LLC, or is the important point whether I have signed the loan or not?


    1. Changing the Deed and Title to the property Does require a “closing” but Not a “sale”. No money needs to change hands. A closing Attorney just needs to change the Title and file it with the court. It would not “come off your credit report” in most cases, unless you refinance the loan. However, most lenders require you to personally guarantee a real estate loan, so even if you put the property in an LLC, you are still personally on the loan and it will show up your credit.

  7. Mary West

    A Friend of mine bought a house in her name for just under 200,000 then the 6 months later put it into her LLC company name and has it on the market for 899,000 is that all ok to do?

    1. It depends if she got a loan for the 200k or if she paid cash? If you buy a property in your personal name and get a loan in your personal name, changing the title to an LLC does Not remove you from the loan.

  8. Lee

    I’m buying a multi-family property. It’s only four, 1-bed units. $60k. A lender said the loan terms will be more expensive if I put it in an LLC instead of borrowing as the sole proprietor. So I obviously want the cheapest terms. Plus, I once had an attorney tell me that if I carried enough insurance, then having an LLC isn’t necessary for protection. Your Thoughts?

    1. If a building is over 4 units, then you have to get commercial financing anyway, so the rate change isn’t that big of a deal in those cases. When your dealing with single family rentals or multifamily under 4 units, residential rate terms are generally much better and they typically allow for 30 year amortization, which some commercial loan products do not. As far as the issue with having enough insurance, I’m not 100% sure. But I do know that the idea of having the property in an LLC, as the article discusses, is to shield any personal assets you might have from any risk or liability that the rental property might incur. I had a client whose tenant fell off a balcony and was seriously injured. Now it wasn’t so bad that it maxed out their insurance coverage, but I could imagine a situation like that where someone might have died and the lawsuit was greater than the coverage most people get. In that kind of situation, an LLC would have created a potential shield from them coming after your personal assets.

      1. NP

        You mentioned that you still have to personally guarantee the loan even if you transfer the deed. Given that scenario is very common, are you still shielded from liability? You mentioned a couple of time above that you were somewhat shielded can you please elaborate?

        1. I advise everyone to speak with an attorney and an accountant to review their own situation. But, generally, the LLC shields the owner from “liability and lawsuits”. But, NOT from the debt. So if a tenant gets hurt in a property, the LLC can help to protect the owner’s personal assets from being brought into the lawsuit. But, an LLC does not protect against foreclosure, short sale or other defaults of the loan or loan payments.

  9. Mike

    I moved to VA over a year ago and rented a house for my family to live in. We were unable to sell our house in MN so we rented it out. Now we are looking to purchase a home in VA and I’m wondering if putting my house in MN into an LLC will increase my purchasing power on a home in VA? Do mortgage companies treat the rental income and expense differently for investment properties held in an LLC?

    1. Probably not. Because the lender will probably still make you personally guarantee both loans, it would lower your debt-to-income ratio to put either property in an LLC and give you more purchasing power. It just helps to reduce your liability.

  10. Aisha C.

    Great article. Very informative and helpful. Thanks for posting.

  11. Robert L

    Without going into all the messy details, I own one home that I live in and two others that are now rentals. The loans on the rentals were originally entered into as primary residence loans. If I make a move to put the rentals intoman llc, will the banks make me do something like refinance as investment properties, and what would that mean to me? Thanks in advance.

  12. A Sirnuri

    My partner and I purchased an investment property on cash and now we plan to rent it out. We have a LLC registered in both our names. What should be our next steps? Transfer the deed from our names to LLC? Can we apply for a tax ID for the LLC or simply what additional things will be needed for tax purposes? Should we open a joint business account at a bank where all the rent gets deposited in LLC’s name? Any help will be appreciated.

    1. You are on the right track! Yes, to all of your questions. You should also get a good CPA and Attorney as part of your investing team. They are critical!

  13. Lewis C


    I recently bought a rental property with a friend. We are both on the loan and have 50% ownership each. It is only a 90k property. Would you recommend creating an LLC in this case? If so, what cost should we expect to pay?

    Thank You!

    1. Generally, I think having a simple LLC when dealing with partners is always the best way to go. If gives the protection we have been talking about in this forum in terms of your assets and liability, but more importantly, the Operating Agreement of the LLC can spell out unforeseen eventualities. Like what happens if one partner wants to sell and the other doesn’t, or what happens if one partner gets divorced or dies? Do both partners have to agree on all Property Management and Leasing decisions or is one partner tasked with Management duties? I think in your situation, I would be looking for that type of structure for the LLC. A simple LLC filing is usually not terribly expensive to do through your State Corporation Commission. However, having the kind of Operating Agreement like I am suggesting, would require a lawyer. But, it’s probably worth the investment. I’ve seen many Investment Property partnerships experience unforeseen events like I described.

  14. AS

    I own a 4 unit rental property with my personal name. I have registered a LLC with the state. Can I rent the apt. Under the LLC, do I have to change the insurance policy with LLC name as well. my bank won’t allow me to change the ownership to LLC, what are my options? Please Advise. Thanks

    1. You would need to Title the property in the name of your LLC. If your bank will not allow it, then you can’t do it. Most banks will allow you to Title the property in an LLC, but they require that you are still personally on the loan.

  15. susan L

    Robert L says:
    February 5, 2013 at 9:39 pm

    Without going into all the messy details, I own one home that I live in and two others that are now rentals. The loans on the rentals were originally entered into as primary residence loans. If I make a move to put the rentals intoman llc, will the banks make me do something like refinance as investment properties, and what would that mean to me? Thanks in advance.

    I am also in this same exact situation and been afraid to notify the bank since my rentals are no longer primary residences to me. Will i be forced to refinance both properties with a commercial loan?

    1. You should discuss with a good local real estate attorney in your area. I don’t think the banks would call your loan or make you refinance, but I’d speak with an attorney before doing it.

    2. Diana


      I am in the same situation. I alerted the banks that I am no longer living in those homes due to PCS. I had to change my homeowner’s insurance, but nothing else changed. They will not make you refinance. I have BofA and Wells Fargo mortgages.

  16. I have one rental property owned by my LLC, which is mostly a building and home improvement business. I was considering changing back to a sole proprietorship because of the expense of my accountant, who charges much more to prepare my taxes for the LLC, since it is more complicated. Since the building business is slow, I haven’t been making the money I used to make and cannot justify paying that bill. My wife can do the tax work for a sole proprietorship. Also, I had to evict some tenants due to non-payment of rent, and when I went to court the judge told me I had to be represented by an attorney, and I couldn’t represent myself. To pay for a lawyer would also be very expensive. After reading your article, I am thinking twice about going back to having a sole proprietorship, mostly because of the legal protection the LLC gives. What are your thoughts on my situation? Would it be better for me to be a sole proprietor and just get better insurance?

    1. Many states require that LLCs be represented by an attorney in court, so yes, that is a good point, because that can raise your eviction costs if you are self managing your properties. Also, I would not have your business and your rental property in the same LLC. If your business got sued, they could go after your rental property. That is the point of having an LLC. Is keeping the assets separate. If you only have one property and your business is slow it sounds like the expense of having 2 LLCs is not worth it for you. Remember its not always worth the expense to have multiple LLCs. It depends on how much money is at risk in each venture.

      1. RBayer

        In South Carolina I know someone that created a holding company, then an LLC for his small business owned by the holding company. When I asked him about that decision he said he did it because a holding company keeps his name and his social security number private but an LLC is public accessible. So on the LLC for his small business, it only shows his fed tax ID. He is worried about ID theft and if he opens another small business, that too will be an LLC under the holding company. Now, I own a duplex and I’m thinking of getting another or maybe a storage rental unit. Do you think this is a smart move for my situation that have more than one duplex or rental income… each under their own LLC , whether or not they are in a holding company?

  17. DBrook

    My business partner and I are purchasing two small apartment buildings. We are getting them on separate contracts, but the our LLC is listed on the contracts as the purchaser. Is it possible for each of us to legally control our own property, even though we wish to keep them under the LLC? (Property is in Arkansas)
    Also, what book keeping will the LLC entail? Thanks in advance!

    1. I can’t give you specific advise about Arkansas, but I believe you can own multiple properties in the same LLC and have more than one member of the LLC that has management control. An LLC does require a different tax filings. I’d recommend you get a good local lawyer and CPA on your team to make sure you get the best advice for your state.

  18. CFang

    I have 6 properties under my name. One of them free and clear. Can I put them all under one LLC or
    6 separate one? Do I have to pay off the loan in order to put in an LLC? Once I do that do I have to change the lease to reflect the LLC as the landlord?


  19. neil

    My wife and I formed an LLC. Our plan is to file schedule C along with our 1040 return. NY is now asking me what my federal tax election is. Choices are sole proprietor, Corporation, Partnership, and Other. My wife and I file married jointly. Any advice on how I should reply to NY?

    thanks !

  20. AWS

    Can members of an LLC, that owns a rental property rent the from the LLC?

  21. Chank

    My husband and I own a duplex, loan in our names, then we went to the county courthouse to change the title into the LLC’s name. We had a bank account in the LLC name and tenants were writing rent checks in the name of the LLC. But when we switched banks, they said we needed an EIN to open an account in the name of an LLC. We don’t have an EIN, because we are in WI (marital property state) and our LLC is considered a “disregarded entity” so we don’t file separate LLC taxes. My question is: should I get an EIN in order to open a bank account, or should I skip it and use our names on the account instead? Thank you in advance for your advice!

  22. J.Lopez

    I am an aspiring investor and I currently have 90k in savings. I am looking into several options 4plex, duplex and single family homes. I understand that $90k is a lot of money and i would ike to be smart on how I invest it and feel terify to make a mistake. I really need some direction and i have no idea where to begin. The bank is offering many options such as FHA on the 4plex but with the change in policy paying premium on the loan i am not sure it’s a good idea. I would like to begin with an owner occupant which allows me to put less down with hopes to have enough savings for other deals to come. Please HELP!! thank you

  23. Anna Lopez

    We have some rental properties in our names and we bought them cash, we don’t have mortgage on those, so is it good idea to put them on a LLC? if so, should we open one for each house or can we have 2 or 3 per LLC. (we live in Georgia)
    Thank YOU for all your help

    1. Fabian

      My name is fabian. I am coming to Georgia from Australia in July with the view of buying a couple of properties there. What answer did you get in relation o how many properties per LLC. As I am an Australian I will have to pay tax in the states and a bit of top up tax in Australia so I don’t want extra admin and cost layers but don’t want to get caught out. The USA seems like a scary place with all the litigation that seems to take place. My email is .

  24. heide jenkins

    hello, we have signed up with an agency, but not signed with a renter yet. as of now it is in our (2) personal names. What do you recommend as a next step to put the property into a LLC before signing on a renter?
    do you recommend anyone in Los Angeles?
    thanks so much for the helpful information on your site.

  25. Suppose I buy a 3plex needs fixing up..say 25k..i would like that 25k in plumbing and expenses..and then when the rent finally comes in ..i can deduct the expenses from the rent..thus having 0 gains for a year or so in the LLC..additionally snowplowing i would like to deduct from rent collected..this can be done in a LLC? message over at my blog. or here..thx

  26. Leon

    I am about to purchase 2 rental properties in Detroit with cash. I live in Hawaii and will eventually move. Are LLCs transferable to different addresses in different states? And do you recommend I purchase these 2 properties (1 single family, 1 duplex) under my name, or LLC? Thank you.

  27. NP

    I have recently purchased all cash rental propety and it is in my name
    I have rented it out.
    I would like to refinance and put into LLC.
    How do you recommed i do it? first get LLC and than refinace in that LLC name? or get refiancing done than transfer into LLC?


  28. Barbara Britton

    We have owned a second home in Tucson since 2004 and are now considering renting it part of the year. Title is currently held in the name of our Trust. There seems to be a growing trend for owners to rent their vacations homes part of the year. Would you still advise an LLC for this “part time” investment property?

    Thank you for such an informative article!

  29. Jason Root

    Great information. Whats the easiest way to begin with an LLC? I have 2 homes in my name that I am renting out, and would like to move both to an LLC. I would like to do this as cheaply as possible. Will I be okay using LegalZoom and some business tax software? Or is it necccessry that I consult with a Tax attotney?

  30. Christie

    I have reverse question for you. Our landlord recently sold the house we live in from his LLC to himself for a *major* loss. What tax benefits did he receive in this?

  31. Jeremy

    Thanks for the informative article. I have a question regarding mortgages/equity. I recently purchased a property and had title placed in my name. The mortgage was also guaranteed by me personally. I am now in the process of setting up a single member LLC and placing title in its name (which is okay with my lender since I am a single member). I need help defining “equity” for the purposes of my new LLC. If the title is in the name of the LLC, but the mortgage is in my name personally, is equity still fair market value less the principal amount of the loan? Since the bank will have the note perfected and the property will still have a lien, what would my exposure be assuming a lawsuit occurred but the plaintiff could not prove I committed tort? I am trying to make sure the plaintiff could not be awarded the asset, but leave me on the hook for the adjoining liability. Thanks in advance for your help. Regards.

  32. I have two rental properties that I own and one property that is my primary residents with a loan. I am interested in putting my (2) rentals into a new LLC. A friend suggested I also put my home into the LLC. I’m concern that if I default on my primary residents loan, the LLC would be held libiable. I also wonder, do I need to change the title on my rental property’s to reflect the LLC Name. And how do I put the properties under the LLC for protection, so both rentals are identify as part as my LLC and not my personal assets

  33. Elaine

    Does the LLC need to be created in the same state where the property is located? For example, I own rental property in Nevada but live in California. Should the LLC be created in California or Nevada? Thanks!

  34. joanne petrosino

    My brothers have a LLC on a building we own together. They did not include me in the LLC. Can I start an LLC also to protect my assests.?

  35. Jeff k

    Carter Snipes is an expert in investment real estate! Thank u for your willingness to help and give advice. Buying my father-inlaw’s 4 unit and trying to understand all this.

  36. Gautam C

    Thank you for the informative article. I have a question. I bought a property in the name of my LLC for all cash. If I now want to refinance and take in some debt to do renovations, banks are saying that I would need to pull it out of the LLC to close on the loan. They also say that after the loan closes, I can put it back into the LLC. Does taking the property out and then putting it back in reduce the legal protection you get from an LLC if something happens down the road?

    Thank you for any information you can share on this.

  37. Tyann

    My husband and I have 3 rental properties, all in 3 separate LLC’s, along with mortgages on all 3, and each LLC has its own checking act. for renters to deposit. There is profit from rents and I want to start paying down mortgage on just ONE of the LLC’s. Can I just write checks from one LLC to another LLC, or would that cause problem if there was a law suit from one of the tenants, and they prove that because we are moving monies from one LLC to another that its not separate? Therefore, all LLC’s would be at risk?

  38. Brian

    Carter Snipes, you’re the man- not only did you write a great article, but you’ve been answering questions for 1.5 years. Thank you.

    I own a house that is a rental, along with my father who co-signed (I’m listed first). I need to extract equity from the house and would like to keep it as an investment, but a cash-out refi, which seems to have an industry-standard 75% LTV, leaves me a bit short.

    Can I form an LLC, borrow 80% LTV (of fair market value) against that via a new mortgage, and buy the house from me and my dad? Then I can get the minimum that I need for my next investment. I would pay off the existing mortgage in the process.

    1. Hi Brian,

      Probably not. Changing the property into an LLC, doesn’t really change the financing options. It’s just a way to protect your personal assets against being sued.

  39. Corinne

    My husband and I have just transferred our rentals into LLC’s and we’re trying to figure out which operating agreement to use. The single member-managed LLC, a manager-managed LLC or a multiple member-managed LLC. Hopefully, you can clarify this for us. Thanks!

    1. Probably, multiple member. But it depends on the language in the agreement. That’s a lawyer question. 🙂

  40. Marjorie

    My husband and I own a 4 unit owner occupied property and a vacation home in California and thinking of placing them under LLC for asset protection. The properties are filed (tax) with schedule E except the unit we live in. Are we required to pay rent to LLC? Are we required to file a California business license?

    If I include my kids to LLC but my husband and I have majority share, if something were to happen to us, does the share transfer equally to remaining share holders?

  41. Paola

    Hi, my husband and me are going to buy a 2 units building in Chicago. I would like to put it under a LLC or a SCORP, is it possible?


  42. Adrian

    Carter, if I own a rental in my personal name, can I file taxes for it under a different entity, such as an LLC or Corporation? Thank you for your time.

  43. caitlin

    Hello – my husband and i are buying our first rental property in another state than we live. we’re not sure what type of LLC is best for us an if we should even both be listed as members. the above article makes it seem there are more tax benefits to having one member vice multiple. aditionally, we’d like to hire a friend to manage the property and kno we need to generate a W-2 for her to do so. can LLCs generate these? any and all input would be very much appreciated!! thanks.

  44. daniel

    Hi if I have a property under my name and want to put the property under an LLC? Can I do it?
    What steps should I have to follow?

    Please let me know


  45. Ashley

    Hi Carter. Question for you – is there a reason you suggest LLC over an S-Corp? Also, would you suggest placing the company’s name under one person or two (i.e. my name or both my/husband’s name)? Thanks for your help.

    1. From my experience, LLC’s work well for pass-through entities from a tax standpoint, so I like them when 2 or more investors are involved in a deal. Each investor’s profits from the entity simply pass through to their individual tax return. S-corps require most members to draw salary and pay payroll tax, so you have potential double taxation. I’m sure there are other reasons, but attorneys and CPA’s that I deal with generally recommend LLC’s for those reasons. As always, you should always consult a local attorney and CPA in your state.

      1. RBayer

        Does the pass-thru work for a one member LLC ?

  46. Daniel

    How does having properties in a family trust affect an LLC? I own 3 rental properties. Is the cost for setting up an LLC the same for one rental property as it is for three rental properties?

    Thank you. I am eager to hear your response.

  47. Dan

    For someone that owns two rental properties, would you recommend that two separate LLCs be formed and one property be transferred to one LLC and the other rental property be transferred to the separate LLC? To limit liability in case of lawsuit against LLC. Thanks for your help.


  48. Susan

    I recently purchased an investment property in california under my name only. My husband has a LLC and we are thinking about transferring the property to his llc. The property was purchased on cash. Is this possible? What is the procedure? Do we have to pay transfer tax ?

    1. If you have no loan on the property, it would be very simple. You will need a local real estate attorney to complete the paperwork. And as always, your local attorney and accountant would need to answer any specific questions about your transaction because all states and localities are different. Good luck!

  49. Will

    Hi Carter – can I create a single member LLC and elect S Corp to avoid self employment tax? or would it still be better to have my wife on the LLC as well. Thanks in advance for the response!

  50. Bianca

    Two questions regarding vacation rental property:

    Property is used 6 months out of the year for personal use, other months for vacation rental. This past season, home was rented for 4 months (not consistently). Owner has just formed LLC recently obtain vacation and will be using it from here forward to obtain business/tax license for FL.

    Will the taxes for 2014 recognize that 4-month period in FL as being operated by LLC even though it didn’t exist yet?

    Is the owner liable during any possible legal actions by tenants? or does the LLC serve as the defending party? If answer is “yes” to first question, does transfer of ownership of property need to occur between owner and LLC then to protect owner and his assets?

  51. Lorna

    My inherited co-ownership of property is still in a trust for 3 more years as required by my father’s trust provision. The property is in re-negotiations with commercial tenant. My co-owners’/trustees’ lawyer advises them to put our shares into an LLC before signing the lease agreement. Is that neccesary? What are the advantages to me to allow trustees to put it in an LLC now vs. waiting until trust ends and let trustees sign new lease now.

  52. Jenifer

    There are 4 partners in our LLC. We would like to take the extra equity out of a property that is owned in the LLC. Do you know if that equity would be taxed as income?

  53. Paul

    Carter, Thanks for the taking the time to reply to all the great questions. If I have 2 rental properties in an LLC, one of them is paid off and the other has 50% LTV, and if there is an accident to the tenant and the LLC is sued will the value of the houses in the LLC be an issue. Can an LLC get renter’s insurance and does it cover accidents like falling off a balcony. Thanks !

  54. John

    Hi my wife and brother inherited multiple income properties. Do you recommend having an LLC for each property. Or have one LLC for all the properties.

  55. Lisa

    My parents both passed away within five months of each other. We want to keep their house in New Jersey and their vacation home in Maine. Both are paid off and have no mortgage. There are three siblings. Can we put both houses in an LLC? If so, do all three siblings have to or should they put all the names on both deeds?

  56. Bill Crooks

    My wife and I own 4 rental properties and own the house we live in. We have no loans against any of the properties. Do you recommend starting a LLC and how do we go about it?

  57. Mike

    Hi Carter! We recently purchased an investment property for rental income purposes that we will use a few weeks out of the year. The property was purchased for cash in the name of our families living trust. Do you recommend forming an LLC even though the property is currently owned by the trust? Can the LLC be formed in the name of the trust?

    Thanks for your help!

  58. Hello Carter

    Hope you are doing great, I have couple of quick questions:
    I am from Texas and planning to buy a investment property (single story ~2500 sq ft) new build house for a rental income. Cost is around $ 270,000. I am thinking of buying under my current entity name (which is PA S-corp). My goal is to pay ~$ 170,000 cash and take $100,000 loan/mortgage.
    ​Do I “have to have” a separate entity as Holding LLC to do that?
    Would it be a tax benefit if its under my current PA?
    If it does not rent out in certain time frame then am I able to show loss in my business ?

    Thank you for your time

  59. Raina Larson

    I own a rental property I purchased in 2009. My brother would like to buy into my property and become partners. He has the available cash to pay half of the value on the condo. In turn, I was thinking to put this cash towards my mortgage. This will allow me to almost pay off the loan and him and I will split all the expenses moving forward. My questions is….. will the cash that he pays me (that will go directly to my loan) be taxed? Is this dependent on if the property is in ann LLC or not?

  60. Andrew

    I have a rental property, in Ohio, that I bought for $1500. It is registered under my LLC. It is in a terrible neighborhood, and I want nothing to do with it. It has fallen into disrepair, and I’m now being brought up on charges by the city.

  61. Lynn

    I have just bought a small commercial building to be used by a radio station. It is in my name as a sole owner. I rent it out to the radio station. They do have occasional parties and gatherings. My accountant said to just purchase it under my name and not to bother with the LLC. I do have assets of about 2.5 million and want to protect them. I have an insurance policy of 1 million and an umbrella of 1 million…do you think that is enough to protect me in case of a lawsuit? The building is flat with only 5 stairs on the inside at the back which does limit the risk of falling down the stairs. Another person I talked to recently said I should have put the deed into an LLC. What is your opinion?

  62. Heather

    I own a condo that I’m renting and was advised to make it an LLC. However, I’m in the process of refinancing under a HARP loan and was wondering if I could still move forward with the LLC under this type of loan?

  63. Shawn

    Hello Everyone,

    Question, If I transfer my rental properties under my LLC do I now need to file that LLC in each one of the States as a foreign business entity?

  64. Richard

    So if you have a rental in single owner LLC you will have a Schedule E on your return. Do you also need a Schedule C ?

  65. Helen

    I own my home, plus a 4 unit (1 bedroom each) complex and 2 (1bedroom) condos. They are all under mine and my husband’s name. We have no mortgages on anything. I am retired with a pension from my prior employer and have a decent annuity. I carry a $1million dollar umbrella policy for protection. I’m debating whether to put the 3 rental properties under 3 different LLC. My accountant has previously said its more complicated and costly for tax preparations. But at the same time, I pay $903 annually for the umbrella policy. I also have to pay higher premiums on my homeowner’s insurance and the rental dwelling policies in order to carry $300,000.00 of liability required by the umbrella policy. I also have to carry $250,000.00/$500,000.00 of liability for each of our two autos. What’s your opinion on the above? Should we keep it as we currently have it or switch over to LLC’s. Thank you.

  66. Tracy Sharpe

    Rather than an LLC to protect you against being sued would it be more beneficial to just purchase a 3 million dollar umbrella policy. Of course there would be a yearly expense.

  67. Tony

    I just read, if you made over $150,000, you can’t claim income loss, but can you claim the rehab

  68. Raj Jayanthi

    What do you suggest for someone who has 3 rental properties. one LLC covering all three rental properties or have 3 different LLC’s?

  69. Raf

    Hello Carter! Great article! So I own one rental property (not in LLC). My husband is not on the deed/loan bc I had it bf I was married. We now want to buy another rental and form an LLC. We don’t really want to co-mingle the properties that we own together with ones we own separately. Should/can I place my single rental in an LLC for suit protection and can I even be in another LLC with my husband for our joint ventures? Any advice or direction would be greatly appreciated.

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