Legal Structure for Rental Properties

[Matt Holt]

I have been doing a lot of research on how to legally structure my properties. I currently have a SFH and a duplex located in Ohio. My SFH used to be the house I lived in so that is still in my name. The duplex I bought using an LLC. I have also heard of people who keep the properties in their name and just have an umbrella policy for protection. I have seen so many different ways that people use LLCs and I am trying to see what everyone else is doing. I have considered doing an LLC per property but it's just not practical as I continue to acquire more properties.

[Nathan Gesner]

I agree with @Ned Carey that it depends on your situation and on how well you can follow the requirements of an LLC. Far too many people set up an LLC and think they are completely anonymous and that their personal assets are protected but the truth is many of them (maybe most of them) could be vulnerable.

Why do all the attorneys have an LLC (or multiple) for their property? Because they can set them up easily and cheaply and because they know how to operate them within the law. Your mileage may vary.

Most investors I work with have their property under their own name. None of them have ever been sued by a tenant and none of them have lost their investment or their personal property. If you are in a more litigious, liberal state like California then you may want to be more careful.

Personally, I think you're better off with a good insurance policy. However, the best protection is this:

1. Know the law and obey it; and

2. Treat your tenants honestly and fairly.