Rental Property Ownership: LLC or Individual?
When deciding whether to have your rental property under an LLC or individual ownership, it is essential to consider the advantages and disadvantages of each option.
-Individual Ownership: Individual ownership is the simplest form of ownership for a rental property. It involves owning the property in your personal name without any legal entity. This option typically requires less paperwork and administrative work compared to an LLC.
However, individual ownership exposes your personal assets to potential risks related to the rental property. In case of lawsuits or claims against the property, your personal assets such as savings, home, or other investments could be at risk.
Lenders often prefer to offer loans to individuals rather than LLCs. You might get better interest rates and terms when the property is in your name.
-LLC Ownership: On the other hand, owning a rental property through a Limited Liability Company (LLC) provides liability protection by separating your personal assets from the property. In the event of a lawsuit or claim against the property, only the assets owned by the LLC are at risk, protecting your personal wealth.
Additionally, an LLC can offer tax benefits and may provide more credibility to your rental business. However, setting up and maintaining an LLC involves more paperwork, filing fees, and administrative requirements compared to individual ownership. This may be the better option if you own the property with one or more individuals/investors.
There are also other ownership options such as under a partnership (LP), corporation, Tenancy in Common, trust, and more.
Ultimately, the decision to hold your rental property under an LLC or individual ownership depends on your risk tolerance, financial situation, and long-term goals. Consulting with a legal or financial advisor can provide personalized guidance based on your specific circumstances.
