Using LLCs To Own Investment Real Estate: Minnesota Home Talk Legal Minute, April 5, 2014

April 5, 2014 marked the beginning of my – and Lommen Abdo’s – affiliation with Minnesota Home Talk.  The show’s host, Jason Walgrave was the original host of another real estate radio show which I was formerly affiliated with and after some discussion, the Legal Minute found a new home on 1500 ESPN AM. 

To kick off things on the new show, what better way to start than with some “real estate law 101”; namely, the reason(s) why it makes sense to own investment real estate within a limited liability company.  You can listen to the clip here.

An often asked question from real estate investors is whether their investment properties should be titled in their own personal name or in the name of an entity.  Especially in a pro-tenant state such as Minnesota, owning investment real estate such as residential rental properties in your name individually is a dumb idea.  Instead, a single member limited liability company should be utilized to shield your personal assets from the liabilities arising from owning the property.  Absent egregious behavior on the part of the LLC owner, creditors of an LLC are limited to the assets of the LLC as to any judgment obtained against the LLC.  For those investors who own multiple properties, owning each property within a separate single member LLC has the additional benefit of compartmentalizing liabilities for each property within the particular LLC which owns that property.  What about administrative hassle such as tax reporting for these types of entities?  There isn’t any, as a single member LLC is a “disregarded entity” for Federal income tax purposes, meaning that all income from these entities are itemized on the LLC owner’s personal return.

The aforementioned reasons are why I’ve often said that use of single member LLCs to own real estate might be the biggest no-brainer there is.

Archived segments are available here, and be sure to tune in to the show live every Saturday at 7AM Central Time, on 1500ESPN AM, or catch the podcast.