LLC for Airbnb

[Luis Ramirez]

Hello BiggerPockets community,

I'm currently a homeowner renting out my primary residence on Airbnb and considering the prospect of buying a new property for rental purposes. I've heard about the benefits of forming an LLC for managing Airbnb properties and would appreciate some guidance on the matter.

Specifically, I'm curious about:

1. What are the key advantages of forming an LLC for managing Airbnb properties?
2. If I already own an Airbnb property (my primary residence) and plan to purchase a new house for rental purposes, what would be the recommended approach for transitioning the existing property into an LLC?
3. Is it preferable to transfer ownership to the LLC or consider a corporate lease arrangement for the existing property?
4. Are there any specific considerations or legal aspects I should be aware of when making this transition?

Additionally, I'm based in Michigan, and I would like to know if anyone in the community is familiar with companies or professionals in Michigan who can assist in the process of forming an LLC and managing the legal aspects of transitioning Airbnb properties.

Any insights or experiences you can share would be immensely helpful as I navigate this potential transition. Thank you in advance for your valuable input!

Best regards,

Luis Ramirez

[Michael Baum]

Hey @Luis Ramirez, so there are varying opinions on this. Here is my take.

An LLC can be beneficial once you get to a certain level. Like 10 or more properties. You can setup a series LLC where each property is in it's own LLC under a parent LLC.

For 2 properties, I don't think it is necessary. Just have top notch insurance and get an umbrella to cover yourself. Run a tight ship. Fix stuff asap that could cause issues, like a loose or rotten deck board.

Many mortgages have a due on sale clause that would get triggered by a transfer to an LLC. That means you would need to refinance, usually with some down (if you don't have enough equity) and a higher interest rate. Not all mortgages, but I would check before doing anything else.

The corporate lease thing has been beaten to death and the general consensus is that it doesn't work.

There is no tax advantage to doing an LLC. An LLC is a pass through entity.

You can use any competent attorney to form the LLC. It doesn't have to be formed in your state. As a matter of fact, forming it in other states could save you $$$ in formation and the long run.

Bottom line, my opinion, it is not necessary at your stage of investing.