ANSWER: It depends.
There are pros and cons to owning a property or properties in an LLC.
BENEFITS:
*PRIVACY - Property Records are public information, so anyone can look up the owner of a property. Owning a property in an LLC provides an extra layer of privacy, that is, the deed would state the LLC entity as the owner, for example "XYZ, LLC."
*ASSET PROTECTION- Essentially, a well-structured LLC will protect the owner's personal assets. In the worst case scenario, the owner's assets (primary residence, savings, stocks, bonds, retirement accounts) would not be at risk.
*TAX ADVANTAGES - LLC's provide a 'pass-through entity.'
DISADVANTAGES:
* INSURANCE - Increased insurance costs is one of the downsides of owning a property in an LLC. It more expensive to purchase insurance for a business than an individual.
* DUE-ON-SALE CLAUSE - Owning or transferring a property may trigger the due-on-sale clause in your loan agreement., requiring you to pay your loan back in full in cash or refinance the property if you transfer ownership. Seek written approval from your lender prior to transferring ownership of your property. Failure to do so may lead to the bank foreclosing on you property, a costly mistake that can easily be avoided.
*FINANCING - Buying or refinancing a residential property owned by an LLC may be more challenging. Since the property is owned by the LLC and not an individual, banks will often look at the business' income and cash flows to support the loan.
*INCREASED COSTS- In general, using an LLC increases costs. First, there is the actual cost of forming the LLC, attorneys fees, and filing fees with the state. Additionally, there will be an ongoing fee associated with keeping the LLC registered.
Some individuals are ok with increased costs because of the benefits associated, others see the additional expenses and the associated returns as unjustified.
Pristine Property Management, LLC
9480 NE 2nd Ave #128
Miami Shores FL, 33138
Eddie Miller, Partner of PPM, is the Past-President of the SE Florida Chapter of the National Association of Residential Property Managers. NARPM® promotes the high standards of business ethics, professionalism and fair housing practices. The Association has a structured educational program and certifies its members in the quality standards of the residential property management industry.
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