Should I form an LLC for each rental property?

This question really comes down to cost vs. benefit analysis.

I usually form a new LLC for every property I purchase.

Remember: You need to setup your LLC before you purchase your property. Watch this video to make sure you don’t make this mistake.

Not only does this strategy of each property owned by a different LLC protect my personal assets, but it also separates each property from the others.

Let’s say that I have 3 houses. The first house (house #1) is owned by LLC #1, the second house (house #2) is owned by LLC #2, and the third house (house #3) is owned by LLC #3.

If a tenant slips and falls at house #1 one and sues LLC #1, my properties owned by LLC #2 and LLC #3 are protected from that lawsuit.

Aside from the extra liability protection I also like to keep my books in my finances extremely organized.

For each LLC that I form I also have a new EIN and a separate bank account.

That means all of my income and expenses for each property sits within its own bank account and therefore is very easy to see which property is more profitable that the others, pay bills, and manage finances.

If on the other hand, I had 1 LLC that owned all 3 of the properties, I would have to rely on my bookkeeper and/or my property manager to differentiate which property brought in income, and which expenses were attached to each property. This makes both bookkeeping and finances a little bit more cumbersome.

Selling the LLC instead of the property (avoiding transfer tax)

Another benefit the having each house owned by a different LLC is that if you decide to sell the property in the future, you have an alternative for an exit strategy.

Instead of selling the real property from your LLC to the new buyer, you can just sell the entire LLC and therefore you may be able to avoid transfer tax.

You’ll need to speak with a real estate attorney and/or accountant in your area to double check on this strategy. I strongly recommend you hire a competent real estate attorney with experience assisting clients in the sale of businesses.

You want to make sure the sales goes through correctly and your are legally avoiding transfer tax. I see a lot of amateur real estate Investors trying to sell LLC themselves and they totally screw it up!

How many LLCs for more than 10 properties?

The above strategy makes sense if you have less than 10 properties. But if you have more than 10 properties setting up 10, 15, 20, or 25 different LLCs and having them all own different bank accounts could, at some point, become a little bit messy from an organizational standpoint.

So what should you consider if you own more than 10 real estate investments? A common strategy is to “group them”… putting 2-3 properties in a different LLC.

Consider LLC fees & annual registration fees for multiple LLCs

Again, for the best asset protection it’s best to put every single property in its own LLC, without those LLCs being engaged in any other businesses.

However if your state has high filing fees and high annual renewal fees then setting up 20 different LLCs could become quite costly on an annual basis.

See the tables below for state filing fees + annual registration fees for all states. You’ll need to weigh the cost versus the benefits to see if it’s a viable option for you.

State filing fees for LLCs

(note: it’s best to form your LLC in the state where your investment property is located. For more info, check out this video)

Consider whether or not you will be financing with the LLC

If you are obtaining financing with the LLC you need to consider two things:

1. If you’re obtaining a loan in the LLC, mortgage rates are typically higher than for personal mortgages.

The reason being is the loan is often considered a commercial loan with the bank.

I don’t know why they call it “commercial” even when the property is a zoned residential, but most banks refer to loans made to LLCs as commercial loans commercial loans.

Commercial loans are made in a different department at the bank and have different qualification requirements.

I recommend making a number of phone calls to your mortgage brokers and bankers to make sure they even issues loans to LLCs. Not every bank does, but if you make enough phone calls, you’ll find one. Trust me, they do exist. Also ask around at your local REIA… you’ll find a few good referrals this way.

2. Also consider that most banks will require you to personally guarantee the loan. This means that if your LLC defaults on the payments, the bank can go after you and your personal assets to fulfill the judgment. Short lesson here: make your damn payments on time!

Added benefit of properties owned in LLCs

In Most states, if you have more than 4 mortgages in your personal name you cannot get any more mortgages.

This is why owning your properties in LLCs is very beneficial. In theory you could have an infinite number of loans made out to all your LLCs… and you’d still be considered a first-time home buyer… meaning, you could qualify for a nice FHA, or other friendly-term financing ;-)

The reason for this is that those loans are “attached” to the LLC and they will not show up on your personal credit report (even if you personally guarantee them).

Holding real estate in specific LLCs

Another strategy that many people use is setting up different LLCs for different asset classes.

For example, if you’re wholesaling properties, you can run an entire business under one wholesaling LLC.

If you own a lot of low-income houses you can put two to three of those in one LLC.

If you own nicer, high-end income properties you can also put those under a different LLC.

Etc., etc.

Here’s the easiest way to start

Easiest way to start is to form an LLC for the first few properties that you buy and then see how the organization and management goes from there.

This way, once you purchase three or four properties you’ll know whether you want to continue and keep setting up an LLC for each property or you want to start combining them.

Or feel free to do this strategy until you have 10 properties owned in 10 different LLCs.

This is the easiest way to start as you don’t need to make a complicated decision before testing it out and experiencing it in the real world.
Cost versus benefit analysis

If you are a real estate boss and you own 50 Properties or more, you really need to consider the cost versus benefit analysis.

See the table above for all 50-state annual fees.

Also, if you have 50 properties each owned by a different LLC, you’ll have 50 different checking accounts… and you’re also be managing the paperwork for 50 different LLCs.

This could cause somewhat of a headache, especially for those who are not organized

Remember, the purpose of real estate investing is to make money enjoy your life. If you’re spending all of your time managing your organizing paperwork, sorting through crazy amounts of bills and making sure you’re writing checks from the correct account, balancing dozens of checkbooks, life won’t be very fun.

Then again, neither is getting your ass sued. So be wise. Do some serious cost vs. benefit analysis.

I’d say 10 properties or less, one LLC for each is a good setup.

11 properties or more: you’ll want to look at some more advanced real estate strategies, like Series LLCs.

Some states allow what is called Series LLCs, which can be an effective way to keep the chaos of multiple LLCs with multiple assets to a minimum if done right.  (Think franchises like Wendy’s or McDonald’s.)  These are a little more complicated, and not an option in all states, so you’ll definitely want a lawyer’s guidance on that scenario.

Hopefully at the point you need this level of complexity, you have some decent cashflow and can afford a badass real estate lawyer and/or tax advisor. They’ll help you get started on the fancy stuff… like different LPs (limited partnerships) which own groups of LLCs, or even Series LLCs if that is a better fit.

I hope this article was helpful!

Now go setup some damn LLCs and starting making those real estate monies ;)

Information verified on October 27, 2026

Matt Horwitz

Founder & Educator, LLC University®

Matt Horwitz is the leading expert on LLC education, and has been teaching for 15 years. He founded LLC University in 2010 after realizing people needed simple and actionable instructions to start an LLC. He's cited by Entrepreneur Magazine, Yahoo Finance, and the US Chamber of Commerce, and was featured by CNBC and InventRight.
 
Matt holds a Bachelor's Degree in business from Drexel University with a concentration in business law. He performs extensive research and analysis to convert state laws into simple instructions anyone can follow to form their LLC - all for free! Read more about Matt Horwitz and LLC University.