When you use an LLC for your rental properties, you are protected as a business entity but allowed to claim the income on your tax return. In other words, if you plan to invest in real estate for business purposes, an LLC will protect your other assets should  one of your properties come under distress or duress.

A benefit of using an LLC for real estate is that both the rental income and the appreciation value are exempt from tax penalties. Owning a single-member LLC benefits the tax payer because mortgage interest is deductible. An LLC, when it comes to rental properties, may incur more taxable deductions that result in less taxes coming due.

 If a tenant decides to sue you as a landlord, forming an LLC for rental property protects your personal assets from a lawsuit. In a dreaded lawsuit situation, your worst-case scenario would be that your rental property is collateral. 

Another benefit of the LLC structure is the process of transferring property under different Ownership is not complicated. Using the LLC as a business structure for your rental properties, you can transfer the shares (through inheritance or as a gift) without having to get a new deed. This means less work on our part, minimizing the required paperwork and fees required in a traditional Real Estate transfer.

To set up an LLC includes paying startup costs. When it comes to financing or getting a mortgage, investors have reported having a harder time getting real estate investment loans due to LLC status versus Individual status. 

A) Lender Preferences because lender A may be more willing than lender B to provide the mortgage to your newly formed LLC, therefore our Firm recommends shopping around. B) Personal Guarantee for lending should be considered due to lenders requiring a personal guarantee from the individual borrower and LLC founder, although the property is owned by the LLC. C) It is important to be aware of the governmental loans that cannot be approved for a mortgaged property under an LLC. D) Portfolio loans are a great alternative investment tool for an LLC designed as a Holding Company for Real Estate Rentals, though these types of loans bear a higher cost of borrowing.

Real Estate and Starting a business to hold a portfolio of properties has its risk and rewards. Make sure to perform your due diligence as an Investor and a Business Owner.