Do you use a separate LLC for each investment property?

[Joseph M.]

Do you use one LLC for all of your investment properties or one for each property? If not an LLC, which entity do you use and why? Doesn't the added cost of maintaining an LLC substantially eat into profit, especially when you are talking about rentals with $150-500/month in profit?

I have two rental properties with personal loans in my name and I am considering picking up a 3 family in my name with a commercial loan. I know I could create an LLC for the commercial loan property, but what are your options if any with the investment properties that are financed with personal loans in your name? My banks are saying that I can't assign these loans to an LLC.

[Samuel R. Harden]

The best general advice I can give is to look at the 1) class of property 2) type of property, and 3) LLC expenses in your state when determining whether you are going to set up separate LLCs.

1) Class: If you have a top of the market house in an A neighborhood, I would keep that separate from properties in C or D neighborhoods. No reason to leave your best properties open to liability that can be created at your worst properties.

2) Type: There is also a difference between an individual LLC for each SFH, and an individual LLC for each apartment complex.

3) Expense: For example, here in Ohio, an LLC costs $99 plus our fee to set up, and Ohio does not have annual fees on LLCs, so while it is not necessary to create an individual LLC for each property, it isn't a huge expense either. The other side of that coin is California, which will charge you $800/yr plus an LLC tax for each individual LLC (including each LLC in a Series LLC).