Sal,
I've researched hours and hours and hours on that...I probably should have just paid an attorney for advice. (although I have spoken to some in passing about it.)
From what I gather, it is a smart thing to do, as it gives you another level of "insurance" in case you get into trouble. If you are going to do it, you should max out your rentals regarding liability insurance (mine is 500k) and also get an umbrella policy (i'm at 2M). However, if these are maxed out and you lose a lawsuit, the winning party will only be able to have "control" over what is in the LLC (so don't keep too much equity in there.) They won't be able to access anything else outside of the LLC, like another LLC with other property. I am considering having my LLC's owned by a Wyoming LLC, which has great protection regarding charging orders. However, I haven't pulled the trigger because it starts to get complicated. (and probably overkill)
For instance, from what I understand, if you do something negligent as the manager, you can still be sued personally. If you don't run the LLC correctly, pariahs can pierce the "corporate veil" and reach you anyway. Having an LLC also adds another tax return unless it's a single member LLC, (which is risky in some states) and adds another entity which you will have to do accounting. Everything has to be separate; obviously banking...but also insurance. I have a policy covering 3 multi-family properties, but I don't want 1 of them in one of my LLC's. So now I will have to separate that one out. Does it change the pricing???? I'm not sure:) Also, how does the money flow? You need to make sure it is being done correctly so you don't break any laws. You may also need to sign the leases as "your name" on behalf of the LLC, and have the checks written out to the LLC. There's a lot of questions that I have, still, and I'm trying to sort it out. I hope this helps.
At the end of the day, I think the best way is to hold a WY or NV LLC, which owns the LLC's in your state. It's just makes it very complicated and a little expensive. However, I think most investors just have 1 or 2 LLC's. There's a few players in my area with 1 LLC and like 50 properties in them. I think everybody has a different opinion. I'm definitely no attorney, so take this with a grain of salt.
Jack
