Should I Purchase Through An LLC

[Benjamin Foullon]

Hi everyone!

I'm purchasing my first rental property within the next few weeks. I'm purchasing out of state and looking in the Cleveland market. Do you think it's better to purchase the property in my name or open an LLC and purchase through that? I'd appreciate any advice! :)

[Greg Scott]

There is no set answer.  It really depends on your specific circumstances.  I'll talk in generalities.

The downside of an LLC is that you can't get a FNMA loan which has the best terms. Buying in your name, keeping the mortgage in your name and then transferring the property to an LLC arguably could invalidate the LLC. Also, you had better maintain the LLC properly or it provides no real asset protection.

If properly managed, an LLC can provide more asset protection, but your first line of defense will be managing your property well and the second line of defense is good insurance.

If I were Jeff Bezos, I would not put a property in my name because it would be a lawsuit target.  On the other hand, Jeff Bezos is probably not buying SF rentals.  For many starting out, buying in their name might be a better strategy.