Put Investment Home Under Our LLC?

[Sammie Baker]

My wife and I are closing on our first investment property in 2 weeks. We used a bank statement loan given that we are both self employed. We plan to use this property as a STR but it's currently under our personal name. How important is it to put the property under our LLC? We will be using the business to pay for all expenses (mortgage etc) as well as collecting all revenue in our business bank account. Does this really matter? Thanks in advance!

[Javier Santana]

Pretty important if you are using for STR. Think about all the potential hazards that someone can sue for damages, then multiply that by 2 for all the unforeseen risk hazards. You don't want a attorney coming after you personally. Risk management! Let the LLC be on the front line.

Then of course you get real estate tax advantages. 

[Nate Sanow]

Keeping personal and business separate is good for many reasons. 

[Jeff Joachim]

@Sammie Baker congrats on your first investment property! I would definitely strongly consider setting up an LLC or land trust. Of course seeking legal council beforehand is strongly recommended and could save you future time money or headaches. There could also be some additional tax benefits to holding your properties in an entity. Best of luck!

[Martin M.]

Equally as important as your entity, or maybe more important, is having solid liability insurance. I had a long conversation with an attorney who sometimes represents plaintiffs in suits against property owners. Their target in these suits, right or wrong, is the property owner's insurance company (not really the owner) in order to receive a settlement payout. This is why insurance is so important.

[Megan Templeton]

I would recommend using an LLC for the purchase and long term holding of the STR. STRs do have liability with the rotation of guests so its important to ensure the liability is removed from you as the owner and contained in an LLC.

[Will Barnard]

For any rental, STR or otherwise, I would strongly urge you to use an entity to hold the asset and create an additional layer of liability protection beyond your insurance policy.

Another person above mentioned "not to mention the tax advantages" - this is not quite true. An LLC provides no additional tax benefits to you, only liability protection which separates your personal assets from the rental property which protects your personal assets. The more layers of asset protection you have, the better you can sleep at night so to speak. Speak with your CPA and/or legal counsel familiar with real estate holdings. Generally speaking, an LLC is good for buy and hold and an S Corp is better for flips. Of course an LLC can also be used with S Corp tax election as well.

Always consult a professional when it comes to tax and legal issues as they will give you the best advice. The info contained herein is not to be construed as tax or legal advice as I am not a CPA or attorney, just posting from experience.