Rental Property Investor · Manchester, NH · Member since 2017 · 45 posts · 51 votes
I understand the reasoning behind placing real estate in an LLC: for the owner to shield himself/herself from personal liability in the event of legal action.
However, is one LLC enough? Say an investor owns 10 properties in a single LLC and those properties' equity represents most of the investor's net worth. He/she has no personal liability if a tenant takes legal action, but the equity of all 10 properties is at risk. Since that's most of his/her wealth, the LLC doesn't appear to be that useful.
Given the above example, should investors break their portfolios into multiple LLCs? If so, how many properties should go into each LLC? There's a balance between legal protection and tax + LLC filing that needs to be struck. Would you name one LLC the holding company of the other smaller LLCs?
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
8y
More often than not , They will sue the insurance before they sue your llc . Banks won’t lend a loan on 10 different llc in a portfolio loan . That will be a problem if you do those all individually
That is exactly why people separate properties based on risk ans might cap one LLC up to certain threshold.
Some Lender actually prefer to loan one property per LLC to shield each property.
Some people don't even have LLC ans have good insurance.
It all depends on your risk tolerance and if cash flow supports it.
It is best to talk to attorney, as there are other factories involved in creating LLC, such as partnering with others, leaving the asset to future generations and many more.
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