Is it a good idea to have a separate LLC for each property owned as a way to limit liability???

In Buying Property - Asked by Donald C. - Oct 28, 2012
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Dr. James T. W.
Broker/Agent
Atlanta, GA

Yes, it is "best" to have a seperate LLC for each property. The main objective here is obviously to "limit" your exposure to negative legal actions against you personally or against one entity. The simpliest nomenclature to use is the physical address of each property. Although many starting investors in residential properties commonly quit claim their personal interest into an LLC after closing you should be aware of possible consequences. Most residential lenders have a clause in the note to accelerate payoff if they discover that you have quit claim the property into an LLC. The quick fix is to to deed it back into the names(s) when the mortgage was financed. This is a non-issue if you own the property free and clear, or usde non-traditional financing that is less stringent. Moreover, this is less of an issue with commercial notes because they will typically allow you to deed it into your entity prior to closing, provided you provide them with the proper articles of incorporation. It would be wise to consult with a good tax attorney, business attorney and or CPA to make sure that your entities are providing you with the proper legal protection and best tax advantages.

Oct 28, 2012
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Rob B.
Chandler, AZ

Donald....
This may depend on the size of the properties owned. There is usually a minimum tax cost for each separate LLC entity. Often with larger properties, the lenders will require a single-entity LLC for each property.
In any event having an LLC is an excellent insurance policy for general liability. However, keep in mind that a lender is likely to have you sign a personal guarantee when borrowing, LLC or not. You should be totally familiar with both your tax and foreclosure laws in your state, prior to making decisions on LLCs, taxes and foreclosure laws.
You should consult either an attorney or a CPA in your jurisdiction to determine the best financial planning and avoidance of liability plans.
Onward and Upward!
Rob Baird
rob@capratecommercial.com

Oct 30, 2012
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Monica M.
Owner/Investor
Valencia, CA

This depends on the size of each property. If you have a handful of single family homes in a single area then you might consider putting them under one LLC. If you have a couple of 4-plexes in the same area then consider putting them under one LLC. If you have larger apartment buildings then they should all be under a separate LLC. If your properties are not close together (either a county or state away) then then need to be under separate LLCs. Remember, whatever you put under one LLC will have to be sold as a portfolio later since this creates a tax mess when pulling tax returns for a prospective buyer. It makes no sense to have ALL of your properties under one LLC then try to pull one out to sell it because on the tax return all of the income will be mixed in one "pot" together.

Nov 1, 2012
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