Landlords: Should I form an LLC for a duplex puchase? (real estate, renter)

[Pughnose]

I know that some folks here are landlords. I've never been (I've rented all my life) but I may buy a Pgh duplex to live in one unit and rent out the other. Down the road I might buy a separate house at some point and rent out both duplex units.

I have rented from landlords, even who only owned one building, who did business as an LLC. I suppose that there are tax ramifications, and maybe limited personal liability (hence the "LL" in "LLC") in case of a sidewalk stumble leading to a lawsuit.

Any experience or thoughts one way or the other? Is it an easy/cheap thing to set up? Does it make sense if I'm living in the building with only a single tenant?

I am posting here rather than in the generic real estate forums because things may vary from state to state, and I'm hoping for a local perspective. Thanks!!

[guy2073]

I have a few units, I just carry a good insurance policy. I don't think I would incorporate unless I bought a bigger unit or took on a partner. With an llc I think you would need to have property insurance in the company name, and you would have to have renters insurance for your inside possessions.

[selltheburgh]

The insurance advice is incorrect from what I know. My rentals are mostly under LLCs.

Advantages:
Limited liability
Easier for book keeping
Easy to add or remove partners to the partnership/ownership without paying transfer taxes or recording fees
Easier to borrow money with a commercial loan when you have a seasoned good relationship with a bank
Property insurance can be based on 2nd partner's credit / Chubb report if 1st partner has claims or credit issues.
Tenants don't know exactly who owns the property
Some tax advantages

Disadvantages:
Extra tax return (or extra schedule for a single member llc)
Extra bank account for the EIN number
Harder to borrow mortgage money from a bank with an LLC versus in your own name - especially a FNMA backed mortgage.


If it is going to be your primary residence, you may not get the tax deductions you normally would if it is deeded as an LLC. Check with an accountant.

[guy2073]

does the insurance on your LLC cover contents or just structure

[selltheburgh]

It covers the building and improvements, not my tenants' property. Plus loss of rents, personal injury, etc. They are advised to get renter's insurance to cover their personal belongings.

[Benzman66]

Originally Posted by selltheburgh

It covers the building and improvements, not my tenants' property. Plus loss of rents, personal injury, etc. They are advised to get renter's insurance to cover their personal belongings.

Absolutely correct!

[guy2073]

Originally Posted by selltheburgh

It covers the building and improvements, not my tenants' property. Plus loss of rents, personal injury, etc. They are advised to get renter's insurance to cover their personal belongings.

That was what I was telling him, he is going to live in one side, the insurance the llc purchases would not cover his personal property, he would have to have renters insurance also, he is technically going to be a renter off the llc.