Understanding LLC for Real estate investing

[Kaylee Sheppeck]

Hello, 

I am a newbie to the real estate investing and I am going to be purchasing a duplex this July. I am very confused on whether opening an LLC and having my rental income go through a LLC is beneficial? I have also seen discussions on opening an LLC per rental property, is this the most beneficial way to do this?

If anyone can give me a basic rundown of if an LLC is beneficial and how to use it to my benefit, I would greatly appreciate that. I seen different opinions and ideas all over the place and its just starting to confuse me.

Thank you for your assistance!

[Brandon Rush]

Hey Kaylee,

The main benefit of purchasing your property under an LLC is asset protection. Simply put, with your property under and LLC (instead of your personal name), if a tenant, contractor or some one else were to sue you because of an incident on that property, they would not be able to go after your assets outside of that property such as you personal residence, your vehicles or other personal possessions. Note, that just because you have the property in an LLC, it is not guaranteed 100% that someone suing you (in regards to that property), could not go after your other assets.

Other than the protection benefit, there are not too many other benefits. There is some level of privacy, but most of the time people can search online and find the owner of an LLC.

Where an LLC may hurt you is the financing. Typically you will pay higher rates on a property purchased in an LLC instead of your personal name. The rates are not out of this world higher, but they will be higher.

Regarding one LLC per property, there is no right or wrong here. You can put one property per LLC and it is also common to place a few properties per LLC up to a certain amount, usually around $1 million.

Since you are just purchasing your first rental property, I would not worry too much about the LLC vs no LLC debate. Just focus on finding and buying your first property. If you have not considered it already, you should think about house hacking. It's an amazing way to get your foot in the door.

Good luck on your journey and don't over think it!