Forming a LLC to rent out a single family house?

[James Berger]

We have a house that we're looking to rent out soon here, just need to finish a few small repairs first.

From what I understand, for liability protection, it's better to rent the house out through a LLC than directly yourself.

I am completely new to all of this, can anyone point me to some guidance on getting started with renting properties through an LLC?

[Evan Polaski]

@James Berger, a) never trust your mortgage company.  They are brokers that make a commission to issue you a mortgage.  You need to look at your actual mortgage document and promissory note.  But they are correct that even if you are not allowed to transfer, the chances of getting caught seem to be very low.  The repercussions commonly are an immediate call of your mortgage, meaning you need to pay it all back NOW.

An LLC can reduce risk to other personal assets, but it also takes a lot more record keeping. Money in is owner contribution, any money out is owner distribution. Docs need signed as the LLC. If you got sued, and there was one document that you signed personally as a lapse of judgement, that may pierce the corporate veil and you are now personally liable for any ruling of the suit. This isn't overly complicated, but it does take conscious effort to make sure everything is handled correctly, every time.

Your next steps are reaching out to a tax professional and an attorney. The attorney will almost always say YES, form an LLC, since they live in full and complete liability reduction, whether those liabilities are likely or not. A CPA will know the tax implications, which there can be real tax implications, but those tax matters may not provide the best liability protection.