Should I form an LLC?

[Fred Hess]

My Situation: My father and I are in the process of purchasing a turnkey SFH rental property in New Jersey. We are splitting all costs and profits 50/50. Our intentions are to buy and hold the property long term and continue to rent it out. We are unsure what the best method of ownership would be. My questions are as follows:

1. Should the mortgage go in both of our names or just one? What are the benefits of doing so? Our lender suggested that the mortgage go only in one of our names and the title/deed go in both of our names.

2. After the purchase is made, should we consider forming an LLC and transferring the title/deed ownership to the LLC? I understand that one/both of us would still have to personally guarantee the mortgage, but would there be any benefits (specifically tax benefits) to forming and holding the property in an LLC?

3. General tax question: If the property is not held in an LLC, only the partner(s) who have their name on the mortgage report the rental activity on their taxes? And this activity would be reported on Schedule E?

3a. General tax question: If the property was held in an LLC with both of our names on it and was treated as a partnership, we would both have to report the activity on our returns regardless of whose name the mortgage is in? And this activity would be reported on Schedule C?

4. In either of these scenarios, is the cost of the mortgage principal payments deductible? Or is only the mortgage interest portion of the mortgage deductible?