Renting Homes Under An LLC

Hi Shanai! 

It's wonderful to hear about your plans to expand your business—how exciting! Your strategy to leverage an LLC for your rental arbitrage venture is both practical and forward-thinking. For my clients, I typically recommend structuring rental arbitrage operations by establishing an LLC and having the LLC enter into a lease agreement directly with the property owner.

However, if the property owner is unwilling to lease to the LLC, an alternative approach would be to rent the property as an individual and subsequently establish an LLC. You could then sublet the property to the LLC, which would serve as the entity conducting the arbitrage business and renting to guests. This structure is advantageous because it helps safeguard your personal assets. In the event of an accident or legal claim, assuming you adhere to all necessary formalities to ensure the LLC is not deemed your alter ego, only the assets owned by the LLC would be at risk—not your personal assets.

Additionally, it's important to consider how your involvement in guest services may impact the tax classification of your LLC. If you provide concierge-style services or actively prepare the property for guests, this income would be considered active, and it may be beneficial for your LLC to be taxed as a corporation. On the other hand, if your role is limited to facilitating guest access without additional services, a disregarded entity structure for your LLC may suffice.

Best of luck with this exciting endeavor!