LLC v. Personal Name & Bank Account for Rent Collection?

Question

I think this is the right place...

Getting some of my ducks in a row to dive in.

I know an LLC cannot get a loan on property through a bank. But curious on once I start collecting rent (yes, getting a bit ahead of myself).

When opening a business bank account and start depositing rents - would prefer tenant does not make it out to me personally. Can I open an LLC to open a business account and pay the mortgage to the bank through this business account linked to an LLC? Hope that makes sense.

Am I overthinking why it might be better for a tenant not to know my name personally? Want to create a bit of separation.

John Underwood · Answer

Put lease in business name also and just tell tenant you are the manager. OK if they know your name. Always say I'll have to check with the owner.

Nathan Gesner · Answer

An LLC is useful for two things: anonymity and legal protection. In most cases, neither is warranted. Warning: I am not an attorney and this can be a complicated topic. Please note the information provided below is a layman's definition designed to provide a basic understanding for the general audience. You should consult an attorney or CPA for your specific situation. ANONYMITY: When you create the LLC, your name is recorded on the documents and published on the Secretary of State website for all to see. So you're not completely anonymous. If you want to be completely anonymous, you can use a Registered Agent. The Registered Agent will record the documents on your behalf so only their name and information appears on the documents. I've done this with my properties because I'm well known in my small town and don't want people to know what I own. LEGAL PROTECTION: By placing your assets in an LLC, you are legally separating them from your personal assets. If someone injures themselves and sues, they will be suing the LLC and not you personally. If your insurance coverage isn't enough, they could seize the LLC assets, but not your personal assets. Additional thoughts: 1. An LLC is not free. You can spend as little as $100 to form an LLC, or you could use an attorney and spend $1,000 or more. There are also additional costs of operating and maintaining an LLC, like separate bank accounts, annual report filings, tax filings, etc. 2. There are rules to follow! If you fail to follow the rules, you may open your personal assets to a lawsuit. An example of this would be mixing your personal money and LLC money in the same bank account. 3. You do not need a separate LLC for each property or a series LLC! Don't make your life more complicated than it has to be. Most professionals will recommend a separate LLC for every $1 million in assets but I don't think that's necessary. In my case, I have residential rentals in one LLC, commercial properties in another, self storage in a third, and my real estate company operates in a fourth. Some have more than $1 million in equity while others have less. 4. The need for an LLC is grossly exaggerated on BiggerPockets and other websites. Have you ever heard of a Landlord being sued by a Tenant and losing property? I've been on this board since 2010 and haven't found an example yet. You've probably heard of big Landlords losing property, but only because they were flagrantly violating Fair Housing, running a slum, or otherwise violating the law in an egregious manner. You are more likely to be struck by lightning twice. The vast majority of lawsuits against Landlords are for wrongful eviction, security deposit disputes, and Fair Housing Violations. Your basic insurance policy with $300,000 in liability coverage should be sufficient in 99.999% of all lawsuits. 5. The best protection for you and your investments? Know and obey the law. I manage around 400 rentals with 12 years experience and have never been sued once. Even if I were sued, I document everything and obey the law, so I won't be found guilty. Even if I were found guilty, the cost would be in the thousands, not in the millions. Insurance would cover it, I would pay the deductible, and no assets would be lost.If you are in an area like San Diego where people are more likely to sue, a judge is more likely to find you guilty, and the payout is likely to be higher, then you may consider an umbrella insurance policy. This policy will provide additional coverage above what your existing policy covers. It's easy to obtain, costs very little, and doesn't require additional, on-going effort to maintain.

Antonette El Baz · Answer

An LLC can open a business bank account and collect rent from tenants through that account. This can provide some separation between your personal finances and your rental property business. Having a separate business bank account can make it easier to track income and expenses for the rental properties, which can be helpful for tax purposes and record-keeping. It's also a good idea to have a separate LLC for each property, that way you have a separate legal entity for each property you own. This can help protect your personal assets if something goes wrong with one of the properties. It's also important to note that LLCs are not able to get a loan from a bank for a property, but as an individual, you can still get a mortgage using your personal name and then have the LLC pay the mortgage. This way you have the LLC protecting you personally and you can still get the mortgage. Keep in mind that it's always a good idea to consult with a lawyer or accountant to make sure you are setting up your LLC and bank account correctly and in compliance with state laws.

Chris Seveney · Answer

@Daniel MrestaniWant separation hire a property manager - who they calling if something breaks? Assume the lease also has your name on it. In todays world anyone can typically be found in under 10 clicks of the mouse and 10 minutes

Tim Delaney · Answer

@Daniel Mrestani not sure where you got the info that an LLC cannot get a loan on a property, they absolutely can, I have multiple properties owned by LLCs that I have loans on from banks. They are not a conventional 30 year mortgage, but they are low interest 25 year loans.You also do not need an LLC for every property- that is overkill.Depending on your state laws you may want to be careful about putting an LLC name on the lease of the LLC is not on title of the property.

Christina Yoon · Answer

Hmm. Your name as owner would be on public record. If you are looking for anonymity, you may want to think options for taking title.