Entity Structure for Rental Properties - Separate LLCs for Holding and Renting

[Tyler Rey]

Hi All,

I'm in the process of pivoting 3 units from a build to sell townhome project to rentals and looking for some entity structure advice.  These are going to be my first self managed units, but my intention is to continue adding units in parallel with development projects.  Entity structure wise, I'm getting conflicting opinions from lawyers/tax advisors on which scenario gives me the best separation between properties and asset protection from rental activities:

1. Each rental property is owned by a dedicated holding LLC and a separate LLC leases the properties from the holding companies and rents them to tenants. 1 rental company to many holding companies

2. Single holding LLC that owns multiple properties and separate LLCs that lease an individual property from the holding LLC and rent it to a tenant. 1 holding company to many rental companies

Tyler

[Nathan Gesner]

1. Do you need an LLC? What are you protecting yourself against? Do you know any private landlords who have been sued for more than their insurance would cover? I've been on these forums for nearly 15 years and haven't found an example yet. An umbrella insurance policy is much cheaper and far less complicated.

2. If you insist on creating a structure, don't kill yourself with complexity for no reason. Most will recommend $1 million in equity per LLC. If you have $100,000 equity in three properties, you can safely put them all in the same LLC.