The classic LLC question - but with a twist

[Brian Walters]

We have all seen and read opinions on what people just starting in real estate investing should do in terms of creating a LLC to own and operate each property. Most of what I have read speaks to the opinions for young investors who are getting started. A lot of these seem to lean toward not setting one up, being the person is just getting started and wouldn't have much at risk either way.

However, what I have not seen a lot on are opinions on what would work best for new investors who are further along in life. For example, I am 15+ years into a good career, but still looking for ways to invest. Being married with kids my #1 goal is to provide and protect my family. Based on this, since I have started trying to learn, I have always leaned toward the LLC being the better way to go. The up front cost, if for nothing more than peace of mind, seems well worth it to me. I'm curious what others feel, or what others in similar situations have done.

Also, would you typically set up a separate entity for each property owned?  And if so, would each of those fall under a single, higher company, or just exist as individual entities?

The goal is to start investing in the Las Vegas/Henderson area over the next year so if anyone has any advice specific to that area I would love to talk in more detail.

Thank you to all who take the time to read and provide any thoughts and insight you may have.

[Marcus Auerbach]

There is no clear case for an LLC. First you have to understand that an LLC does not provide protection, it only limits your expose. And then there is this question:

What risks, specifically, are you concerned about?

If you run a sound buisness, keep the property safe and have good leases, your risk is low. Your liability insurance will cover the rest. You want to be safe? Add an umbrella insurance.

What incident would cause someone to sue you - successully! - and get awared more than one million? It's hard to come up with a good answer in a small residential property. You could also get hit bu lightning.

Once your portfolio grows, you can devide it in 7 figure chunks and hold them in individual LLCs, like 5 duplexes. At that point you need commercial financing anyway. Until then enjoy the benefits of a 30 year fixed loan, which you can only get in your personal name.