Pros and Cons of buying property through LLC and individual

[Joyce Ong]

My boyfriend and I are exploring the most efficient way to invest in property. We notice some people purchase it as individual but some rather purchase it through LLC.

I find this very interesting as I always thought that buying the property under individual name and rent it out as vacation rental (STR) would be the easiest way. I wonder if anyone can shed a light on why and why not to structure the investment under LLC and under individual.

Thank you for the help!

[Scott Smith]

Hey Joyce,

Depends on what you define as "most efficient." Sometimes the most efficient, or easiest, way to do things will end up costing you down the road. I would agree with @AJ Leman and say it would depend on your goals. The LLC is an asset protection tool and can also be used to help with taxes in some circumstances, but will introduce different costs and requirements. Even when my clients use an LLC, I often have clients purchase in their own name for favorable financing options, as buying directly into an LLC will limit your best options in many circumstances. If you go this route, then you need to understand how land trusts play into things.

The rabbit hole goes very deep. Essentially, you need to clarify your current situation and goals. I often will have clients tell me (1) their current personal assets, (2) current investments and (3) future investment goals. All of that plays significantly into what measures you should take. I would encourage you to ask "what is the smartest way to invest in property," rather than the "most efficient." I wouldn't recommend big asset protection structures to people who don't have much to lose because it is just overhead they shouldn't worry about, yet. But I would encourage people with lots of personal assets to invest in asset protection, even if they just had a single investment property.

This isn't legal advice, simply my opinion as an investor myself.