LLC for rental property?-Still undecided

[Jeff Metzger]

Good afternoon BP Members,

I am in the process of acquiring my second buy and hold long term rental investment property. I am still undecided on whether or not to start an LLC at this point. For my first property, the tenants are friends of mine and I was less experienced so i never even considered it. I am aware that i can not get financing through a new LLC with no track record, this necessitates that the financing be in my name and thus property ownership as well. Then there is the challenge that of the due on sale clause in most mortgages that will not allow transfer of the property into the LLC. I have been told by an investor i know that even though the property will not be owned by the LLC that it can still still be ran by the LLC. I'm not sure entirely how this would work. I like this idea due to the fact that the rental seems more official and may look better in the eyes of tenants. The lease agreement would be between the LLC and the tenants, however i would act as the landlord and not use a property manager.

Has anyone had experience with using an LLC in this fashion? Also, the process of starting an LLC on the Colorado secretary of state website seem simple but does anyone have any advice on the process? Are there any benefits of using a lawyer to form the LLC considering the scale of my current holdings(just 2 properties)?

I still plan on getting an umbrella insurance policy for both properties for protection there and i figure any Possible LLC liability protection is good idea as well