Why Buy Property Under an LLC? (3 Things to Consider)

Jon Morgan
Published by Jon Morgan | Co-Founder & Chief Editor
Last updated: September 16, 2023
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Acquiring a property isn’t as simple as it sounds. It can be a stressful process if you don’t know the safest way of protecting your properties. LLC is one of the best ways of purchasing your properties.

You could even buy multiple properties for investment purposes or provide rental income through an LLC.

With over a decade of practice as a business consultant for limited liability companies in various states, I have addressed clients' concerns regarding purchasing a property under an LLC.

I'll provide you with all the information you need to understand and complete the process.

Quick Summary

  • Buying property under an LLC protects the owners from any personal liability.
  • Some properties acquired through an LLC might be exempted from taxation.
  • You enjoy privacy when you acquire a property through an LLC.

Why Buy Property Under An LLC?

Buying a property under an LLC is one of the ways of separating your business from your personal assets.

LLC also allows you to invest with your partners in different properties and agree on a percentage of ownership. Also, buying property under an LLC protects you from unseen risks such as lawsuits in case of a dispute in the stated asset.

How Does LLC Protect Real Estate Properties?

Miniature house of an real estate property bought under LLC

An LLC protects real estate properties by separating the assets of the company from the personal property of its members. Only the company's acquired properties can be used to settle debts and liabilities in the case that legal issues arise.

A limited liability company (LLC) is a legal business structure that protects the members of an LLC from personal liability, much like shareholders in a corporation do.

The liability protection provided by incorporating your real estate investments through an LLC can be greater than the limited liabilities offered by other types of corporations.

This benefit could allow you to invest more money without risking it if something goes wrong.

The personal assets of a business owner can be protected from liability claims in a limited liability company [1].

A qualified LLC is organized under the relevant state laws and regulations such as an LLC operating agreement, LLC articles of organization, and other similar legal documents.

Doing so can obtain all the benefits offered by state law to protect its members against business debts or liabilities arising outside the course of business operations.

LLC is not a corporation, so it does not have the same formalities as corporations do.

This means that you can open LLC accounts at checking institutions just like individuals and obtain all standard business-related bank services available to other small businesses.

Also, LLC members are protected against personal liability for business debts or contractual obligations under state law.

Incorporating real estate through an LLC can provide limited liability protection to the investor and tax benefits such as pass-through taxation, which allows all profits and losses of a business to be passed on directly to its members, who then report this information on their personal income tax returns.

Here are the top reasons why becoming a property owner under an LLC is a good idea.

1. Privacy

A padlock close up image

Limited liability companies that decide to purchase real estate to operate their business are often faced with buying in their name or through an LLC.

It is important to consider buying property under an LLC to help maintain your privacy.

Despite being anonymous in terms of ownership under an LLC, you will still have full control of your properties and this includes transferring your assets to another person.

When you purchase real estate under an LLC, the property purchased is owned by the business entity and not you personally.

2. Asset Protection

Close up image of assets

LLC owners who buy real estate under their LLC can protect themselves from any liabilities that may arise.

For example, an asset protection strategy would be breached if the buyer personally borrows money to finance real estate purchases and then defaults on these loans.

However, when a limited liability company owns real property, this risk is minimized since the real estate is separate from the LLC owner's own assets.

In that way, if a lawsuit arises and results in a judgment against the buyer personally, creditors cannot seize his real property since it does not belong to him; rather, it belongs to the LLC of which he owns shares.

This also means that while an LLC protects real property ownership, real estate investors can still be held personally liable for any business debts or liabilities that the LLC incurs.

An example is a real estate investor who uses his personal bank account or credit card to make payments from his LLC account and defaults on these charges.

In this situation, he would have breached both asset protection and the corporate veil.

3. Tax Exemption

Close up image of a calculator with TAX word

Tax advantages of owning investment property are huge for real estate investors with an LLC. Depending on where you live, your investment can be tax-free in some cases when held under an LLC owned by multiple people.

Property owners who own real estate through a limited liability company or any other entity that is not taxed as a corporation receive this benefit regardless of whether the LLC has employees or operates out of a brick-and-mortar building.

The benefits of investment property ownership through an LLC are that the owner can lease out real estate to another party for rent and exclude all rental property income from taxation under the Unrelated Business Taxable Income code.

The Internal Revenue Service will not consider this self-employment or investment income since the LLC owner provides no services.

Rental properties held in an LLC also benefit from depreciation deductions.

There are other tax exemptions that real estate owners can take advantage of when they hold their properties through a limited liability company or any other entity that is not taxed as a corporation, such as:

  • The IRS will not consider this rental income and gains on the sale of investment properties held within an LLC for taxation
  • Depreciation deductions are allowed on the property, even if an LLC owner does not rent it out.
  • An individual can exclude all capital gains from selling investment properties held within an LLC.

See our article for more information on how to transfer real estate to an LLC.


Does LLC Debt Count Against Mortgage?

LLC debt counts against a mortgage since a company's credit score is a major factor when applying for a mortgage loan. However, lenders may extend the loan if the business entity has mortgage insurance.

How Do I Transfer My Mortgage to an LLC?

You can transfer your mortgage loan to an LLC by obtaining a Quitclaim Deed Form, recording it, and changing your lease. You need to have an LLC in good standing with the state and have its own EIN and a separate bank account.

Can LLC's Get Residential Mortgages?

LLCs can get residential mortgages if the company is deemed qualified by the lending agency. Mortgage lenders will require financial documents that reflect your income, credit score, and debts.

How Many Mortgages Can an LLC Have?

An LLC can have up to four mortgages at a time since most banks and lending institutions set this limit. Loan requirements become more rigid when the company has several outstanding loans.

Can an LLC Be Named Insured on a Homeowners Policy?

An LLC can be named insured on a homeowner's policy if the company is designated as additional insured or additional interest on the policy.

Can I Sell My Rental Property to My LLC?

You can sell your rental property to your LLC by transferring the title of the property from your name to the company.

Can an LLC Get Federal Housing Association Loans?

An LLC cannot get Federal Housing Association loans, however, you can obtain a personal FHA loan using the company as the guarantor. It is important to note that the loan cannot be in the name of the LLC.

Can a Foreign LLC Own Property in Another State?

A foreign LLC can own property in another state by registering the company in the state you're investing in.

You will have to register the LLC with the Division of Corporations or a corresponding government agency within the state.

Can an LLC Sell a Property?

An LLC can sell a property by transferring ownership through property deeds signed by an authorized individual to represent the company.

The sale of property by an LLC falls under state laws that determine how business can be conducted.

Can an LLC Get a Portfolio Loan?

An LLC can get a portfolio loan if the company's investment returns qualify with the terms of the lending company. The main basis for approval is the amount contained in your investment and not your credit score.

Is an LLC Good for the Real Estate Business?

An LLC is good for real estate business because it limits the liability of its members. It can shield them from lawsuits or other legal actions taken against the LLC itself.

For example, if you are a member of an LLC that owns commercial real estate and someone gets injured on your property, they cannot sue you personally.

Buying Property Under an LLC

If you're considering buying a house with an LLC, it's important to consider all the ongoing costs, legal fees, and implications that come with this decision.

A qualified online legal service can help guide you through your options. Also, they can offer guidelines on the risks you might face, or get answers to your most pressing questions.


  1. https://www.nasdaq.com/articles/does-an-llc-protect-your-personal-assets

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