What are the Benefits of Buying a Home With an LLC?
Ask Michele | Jul 9, 2014 | By: Michele Lerner |
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Q. My uncle mentioned that he’s buying a house using an LLC instead of buying in his name. Should I buy my home using an LLC? What are the benefits of buying with an LLC?

A. Buying a home through a Limited Liability Company (LLC) is beneficial for two main reasons:

buying a home with an llc

1. Homeowners can maintain some privacy because the LLC is listed as the property owner.

For buyers who don’t want nosy people to be able to locate their addresses in public records, buying a home with an LLC is the preferred way to buy property.

Many buyers of high-end properties prefer using an LLC, because all property transfers are recorded and available to anyone who wants to look up information on an address. An LLC offers a first level of defense against a buyer’s name entering the public record.

2. Owners can protect more of their assets in the event of a lawsuit.

If you own your residence in your name (as most people do), someone who’s injured on your property can sue you directly.

While homeowner’s insurance (and umbrella insurance if you have it) will cover the payments on a successful lawsuit up to a certain point, your other assets––including your savings, investments and home equity––could be garnished to pay the rest of the damages.

However, if you own your home in an LLC, then the lawsuit can only name the LLC, and the only assets that can be used to pay off the suit are those assets held in the LLC (which usually would just be your home.)

In addition, investors commonly use an LLC to purchase properties they intend to rent to tenants because of the liability protection offered by the structure. When you own your property as an LLC you pay your property taxes through the LLC and can even funnel other costs of homeownership through the LLC.

Keep in mind establishing an LLC will impact your property taxes and future capital gains taxes. The impact varies from state to state, but in most states you’ll need to pay an annual-report filing fee in addition to your property taxes. You’ll also need to pay legal fees to set up an LLC, which can be expensive depending on the structure of your LLC.

If you’re considering buying a home with an LLC, it’s important to consult an attorney and a tax advisor with experience in your state. You need expert advice to understand the implications of buying property under this type of ownership .

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Send your real estate questions to Michele at advice@realtor.com, and she may answer them in upcoming columns.

Related: Read previous Ask Michele columns.

Michele Lerner, author of “HOMEBUYING: Tough Times, First Time, Any Time”, has been writing about real estate and personal finance since 1990. Her work has appeared in The Washington Post, MSN Real Estate, Fox Business, The Motley Fool, Bankrate, HSH.com, The Washington Times and Daily Finance.

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