Owner Finance as an individual vs as an LLC

[Sonu Sharma]

Hi, I am planning to owner finance a home for the first time in the DFW metro area. I have so far bought a few homes under my own name vs buying them through an LLC. I haven't setup an LLC yet. Can we even owner finance a home to buyer as an individual or do we need a company to do that ? If so, can someone please suggest the pros/cons, costs of owner financing under an individual's name vs an LLC ?

[Ned Carey]

@Sonu Sharma Financing and liability are separate issues you seem to be combining. 

Yes you can owner finance a property you own in your own name. (Possibly subject to Dodd Frank laws. They probably don't apply to a single transaction. Ask a local TX attorney)

As a lender you have no liability for the property. An LLC for that purpose probably won't help.

However as the SELLER you may be liable to the buyer for hidden defects.  In MD for example, even when selling "As Is" you need to disclose any hidden defects that you are aware of. This is simply one of the risks of rehabbing. 

If you are going to continue to rehab properties, insurance is definitely recommended, whether you have an LLC or not. Whether to create an LLC is a complex issue. Wil the LLC have multiple members? Who controls the LLC, who hires the contractors, your personal risk tollerance, your financial and tax position are all issues to be considered.

There are many threads here on the pros and cons af LLCs for background information. LLCs are far from perfect protection from liability. Contact an attorney and CPA in your state for guidance.