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Updated over 3 years ago, 03/23/2021
Using LLC for Rental License while Deed is under personal name
Hello all,
I'm new to the forum and just started in Real Estate Investing. Recently, I've purchased a duplex in the great city of Philadelphia and wishes to rent it out. I'm in a pickle as I want to use a LLC but it seems like I don't need one due to the infancy stage of my investment growth. However, I want to use a LLC for my rental license while still enjoy the better interest rates with the properties under personal loans (vs. a commercial). Will the LLC have the same legal protection on the rental property if the rental license is under its name rather than mine?
Thank you,
@Chris K. has talked about this in a few other threads.
If the property is deeded in your personal name, the rental license held in an LLC will make no difference to your personal exposure to liability. If someone trips on your sidewalk any lawyer taking the case will immediately search public records and bring the deeded owner into the case. Probably your LLC 'managing' the rental as well. So you'll still personally be a named party in the case.
Creating an LLC to manage the property is probably more trouble than it's worth. You can still get anonymity with a virtual mailbox, Google Voice number, and LL-specific email address used for RE activities only. Do this along with a big fat GL insurance policy and umbrella on top of everything.
*mandatory " am not your lawyer" disclosure, this advice is worth what you paid for it..
- Kevin M.
Same disclosure as above - I am not a lawyer.
I ran into this same situation when I started. I bought 3 duplexes in my personal name but ran everything through my LLC. It was difficult to get lenders to lend to an LLC with no income, so I definitely understand. I did everything as if the LLC owned it (even taxes) and then eventually moved the deeds over to my LLC through a real estate attorney. I'm not sure if this is the right or wrong way to do it, but this is what worked for me so I thought I would share.
@Rick Novotny here in PA moving a deed from a personal name to an LLC can end up being a costly process. For every transfer of title, the county and state impose a transfer tax (PA is a flat 1%, Philadelphia charges 3.28% on top of that, other counties often an additional 1%). Even if you dollar deed the property from one's personal name into an LLC, the govt will charge the transfer tax off of the assessed value of the property. For multis with higher assessed values this can end up costing $10k+ simply to move the deed into an entity's name.
I suppose a potential way around this would be to have the rents paid to the LLC for management but as @Kevin M. mentioned the deed would still be in your personal name.
@Alex Uman wow, here in Louisiana my title company will basically do it for free. $250 and they bring it to the courthouse and get it recorded. The $250 is for recording charges. 
@Chad C. for properties outside of Philadelphia county with lower assessed values it could be worth the expense but all depends on when it was last assessed. I've often advised investors to consider this before closing on a deal in their personal name as title will need a couple days to do a bringdown before closing.
Originally posted by @Kevin M.:
@Chris K. has talked about this in a few other threads.
If the property is deeded in your personal name, the rental license held in an LLC will make no difference to your personal exposure to liability. If someone trips on your sidewalk any lawyer taking the case will immediately search public records and bring the deeded owner into the case. Probably your LLC 'managing' the rental as well. So you'll still personally be a named party in the case.
Creating an LLC to manage the property is probably more trouble than it's worth. You can still get anonymity with a virtual mailbox, Google Voice number, and LL-specific email address used for RE activities only. Do this along with a big fat GL insurance policy and umbrella on top of everything.
*mandatory " am not your lawyer" disclosure, this advice is worth what you paid for it..
Thanks Kevin, this is a good point!
Main reason for LLC is for legal protection so it doesn't make sense to incur more filing fees when the deed is under my name. I also didn't know about the virtual mail address, that will be something i'll look into!.
Thank you!
Originally posted by @Rick Novotny:
Same disclosure as above - I am not a lawyer.
I ran into this same situation when I started. I bought 3 duplexes in my personal name but ran everything through my LLC. It was difficult to get lenders to lend to an LLC with no income, so I definitely understand. I did everything as if the LLC owned it (even taxes) and then eventually moved the deeds over to my LLC through a real estate attorney. I'm not sure if this is the right or wrong way to do it, but this is what worked for me so I thought I would share.
Congrats on the 3 duplexes! and yes i think a LLC would be my endgoal eventually but the it's harder to move over in Philly since there are more bureaucracies involved. I might just start using my LLC for future investments instead.
Originally posted by @Alex Uman:
@Chad C. for properties outside of Philadelphia county with lower assessed values it could be worth the expense but all depends on when it was last assessed. I've often advised investors to consider this before closing on a deal in their personal name as title will need a couple days to do a bringdown before closing.
Great points here, Alex. I totally forgot about the transfer tax and that is going to be pricey and they are not tax deductibles either. I'll probably stick with what everyone here is saying and go without a LLC for now.
Although, would the transfer tax be based off of my original purchase price or the county assessed value?
@Forrest Hayashi to my knowledge it would be based off of the last assessment value if you sell it to your LLC for less than that previous assessment (typically dollar deeding it).