Entity for owning multi-family rental property

[Greg Atwood]

I am new to RE investing and about to become a landlord.  I am a dentist and am set up with a couple of business entities; one owns the practice and another owns the equipment and furnishings and leases it to the practice.  Apparently there are some accounting advantages so my accountant set it up this way.  When I told him I was looking to buy some rental property I asked him if I should set up a separate entity or if I should just buy it with the company that owns my dental building and equipment.  He said it would be best just to buy it with the existing company.  I am set to close on 9 units next week.  I am also seriously in negotiations about a 16 unit property.  As I was thinking about it, I started thinking that his advice may strictly be from an accounting aspect, but from a legal/liability aspect, is that the best way to go?  

Would it be better to set up an LLC for owning the rental properties?

Should I have a separate LLC set up for each property?

It may be too late to get an LLC set up for the first deal set to close on June 1. If I close on it with the existing company, how difficult is it to transfer it to an LLC afterwards?

If an LLC or multiple LLCs is the way to go, what is the simplest/best/least expensive way to set these up?

I appreciate any insights on this.

[Andrew Johnson]

Greg Atwood From a liability aspect you shouldn't use an LLC as a proxy for insurance. If you're worried, then bump the $1M-$2M in coverage you're likely to be required to have to $2M-$4M. It's more of a "sleep soundly at night" thing. An LLC isn't going to really stop you from being named in a lawsuit (if it happens) and a commerical lender will likely require a full-recourse loan so you can't exactly walk away. So while it's not a bad idea at all it's not a cure-all from a liability perspective. You will also have to work (if you're worried about liability) to keep equity in the property as low as possible. Which can create some refinance and possibly cash-flow challenges over time. If you end up with the property free-and-clear I the LLC then the whole thing is up for grabs. But I'm not a lawyer, maybe there are ways around this, etc. So the net of my advice: get solid insurance regardless of what entity owns it.