Personal Purchase vs LLC

[Terrence Bayly]

I am looking to purchase a buy and hold investment rowhome in the Deanwood neighborhood of Washington DC. What are folk's recommendations for forming an LLC to buy the property vs. buying it in my name, keeping in mind rent control restrictions if owned by an LLC? My plan is to try to build a portfolio of 5 properties so unsure if I should create serial LLCs or keep them in my personal name as not to limit rent increases in a potentially gentrifying area. Any thoughts would be greatly appreciated.

[Michael Seeker]

@Terrence Bayly - My suggestion for LLC vs. personal in general hinges on financing:

If you plan to grow over 10 properties AND use financing, go with LLC. If you plan to max out at 10 or fewer or buy all cash then either is fine.

Owning 10+ properties puts you firmly into the investor camp and you'll need to work with commercial lenders if financing. They strongly prefer LLC ownership and many require it.

Under 10 units and you can go the conventional residential financing route which (aside from some questionable title transfer approaches) will require you to own the property in your personal name.

If LLC ownership subjects you to rent control, then I'd lean towards owning in your personal name.

There is a big BUT to this which was not a consideration just several weeks ago. If you own in an LLC, you now get favorable tax treatment that you do not get owning in your personal name. You should look into the tax differential and potential downside from rent control and weigh the two to see what makes the most financial sense.

From a protection standpoint, in either case you want to make sure you've got sufficient insurance coverage both for the properties and for liability.