When you buy a home, having the title in your name provides tax benefits. But it’s also possible to form a limited liability company, or LLC, to buy the home instead of owning it yourself. This can offer homeowners certain protections, but it comes with trade-offs. Here’s a look at what an LLC is and how to buy a house with an LLC.
Key Takeaways:
- A limited liability company, or LLC, is a business structure that protects its owners from being held personally liable for the company’s debts and legal disputes.
- Buying an investment property with an LLC can limit your liability, protect your privacy and offer tax benefits.
- Buying a house under an LLC makes less sense for a primary residence because it’s more expensive.
Can An LLC Buy A House?
Yes, an LLC can buy a house. But it’s not the right fit for every situation.
“You must consider whether the benefits of owning a home in an LLC might outweigh the potential drawbacks,” says Chris Gleason, founder and CEO of Simplicite Tax Loans in San Antonio, Texas.
Buying a house with an LLC can protect your privacy, limit your liability in the event of a legal dispute and grant you tax benefits. However, the requirements to buy a house under an LLC differ from buying a home as an individual. It can be more challenging to find and more expensive to get financing when buying with an LLC.
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What Is An LLC?
A limited liability company, or LLC, is a legal structure that protects its owners from personal liability for any debts or claims against the business. With an LLC, the owners (also called members) and shareholders are not held personally liable for any losses related to the business. Most states allow single owners to own an LLC, so you can be the only member.
There are also tax advantages to owning an LLC, because it is taxed on what is known as a pass-through basis. This means you’ll pay all taxes through each owner’s personal tax return. The primary benefit is that you’ll avoid getting taxed twice – once on the business level and then again on the individual level.
“LLCs are cheap and easy to set up,” says Doug Greene, owner and operator at Signature Properties in Philadelphia. “Anyone can do it for less than a couple of hundred dollars, but you might want to hire a professional to properly set things up – especially since this is going to be the structure that holds a very expensive asset.”
“An LLC is a corporate entity, and it can close on one or many properties under the single LLC veil,” Greene says. “In addition to just owning a house under your own name, many people opt to buy property in a trust or LLC for extra protection. Usually, investors and landlords do this if they want to protect against liability or taxes or remain anonymous.”
If you buy a house with an LLC, Greene recommends creating and registering the LLC in the same state as the property you are buying.
“This is not a requirement, but it’s a best practice,” Greene says. “For one, it keeps things organized, and, secondly, it protects you – or the LLC – against localized laws and tax treatments. Although this is not a requirement, I highly recommend it.
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How To Buy A House With An LLC: Step-By-Step Process
Step 1: Form Your LLC (If Needed)
If you don’t already have an LLC, you’ll need to create one in your state. It’s a fairly easy process, though, and costs about $50 – $300 in filing fees, depending on your state. You’ll need to choose a business name, file articles of organization and obtain an Employer Identification Number (EIN) from the IRS. Check your secretary of state’s website for instructions on how to file as an LLC and specific requirements.
Step 2: Secure LLC Financing
Traditional mortgages like Federal Housing Administration (FHA) and conventional loans aren’t available to LLCs. When buying a house with an LLC, you’ll likely need to explore alternative financing (which we’ll explore later in more detail). The main options include:
- Debt service coverage ratio (DSCR) loans: This type of non-qualified mortgage (non-QM) loan uses property income rather than personal earnings to determine your ability to repay the loan.
- Portfolio lenders: Some portfolio lenders offer proprietary products and service the loans in-house, offering more qualifying flexibility.
- Commercial real estate loans: These loans typically have higher down payment requirements (20% – 30%) and may be harder to find.
- Private or hard money lenders: These lenders offer faster but more expensive financing.
Step 3: Prepare Required Documentation
LLC purchases involve more paperwork than a standard mortgage. You’ll need to provide the following documents:
- LLC operating agreement
- Articles of Organization
- EIN documentation
- LLC bank account statements
- Personal financial statements (most lenders still require personal guarantees)
Step 4: Complete The Purchase
Ensure all purchase documents clearly list the LLC, not you personally, as the buyer. When buying a house with an LLC, work with a real estate attorney familiar with these transactions to avoid any issues and ensure all paperwork is properly executed to avoid ownership disputes later on.
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LLC Real Estate Financing Options In 2025
Getting a mortgage for an LLC purchase requires a bit more legwork than traditional programs. Here’s more detail about your potential options:
DSCR loans: These loans are a popular choice for LLCs because they qualify based on the property’s rental income potential rather than your personal income. A DSCR loan is a worthwhile option for investment properties, but they do require 20% or more down.
Portfolio lenders: Some banks keep loans on their books rather than selling them on the secondary mortgage market like most mortgages. These portfolio loans allow for more flexible borrowing guidelines, and the lenders often have established relationships with real estate investors.
Commercial real estate loans: These treat your purchase as a business transaction, typically requiring larger down payments of 20% – 30%, but offering more flexible borrowing terms for experienced investors, such as limited fees, fixed rates and longer loan terms.
Hard money and private lenders: Hard money loans can provide you with financing quickly, but at much higher interest rates and shorter loan terms. Meanwhile, private lenders offer more flexible guidelines than traditional lenders and are experienced in working with real estate investors. They offer some of the same advantages of hard money loans but often have longer loan terms and dependable closings.
Is It Possible To Transfer A Property You Already Own To An LLC?
Let’s say you bought your house under your own name and then you later started an LLC and now want to transfer the ownership of your home to that LLC. It’s possible – but it also may trigger two different clauses listed in your mortgage: the due-on-sale clause and the mortgage acceleration clause.
- Due-on-sale clause: If you transfer or sell the home, you’ll have to fully repay the mortgage.
- Mortgage acceleration clause: If you transfer your home to your LLC without first getting your lender’s permission, it might trigger the mortgage acceleration clause. The lender can demand that you repay the amount you borrowed in full – plus interest.
As a result, you’ll likely need to take out a new home loan to pay back the original mortgage. If interest rates are substantially higher than when you took out that loan, you could pay more in interest.
When Should Someone Consider Buying A House With An LLC?
Buying a home with an LLC can be a helpful business strategy for experienced real estate investors who plan to buy multiple properties. For first-time home buyers or novice real estate investors, the downsides of buying a house with an LLC might outweigh the benefits.
“One important consideration is whether or not you plan to borrow for the purchase of the property,” Greene says. “As an individual, you can borrow through a regular conventional mortgage or similar structure, but when you’re set up as an entity like an LLC, you need to shop for different loans.”
Greene also says that buying a home with an LLC can affect the terms you’re offered on a mortgage.
“Corporate entities can still borrow, but in the eyes of a lender, they are viewed as a bit riskier and therefore have less favorable terms, such as interest rates, down payments, mortgage insurance and additional points at closing,” Greene says. “They view LLCs as similar to businesses when they look to borrow money. On the contrary, when you buy a primary residence in your personal name, you get the best terms possible.”
“There are generally two main reasons that I see drive people to take title to a home in an LLC,” Gleason says. “First, they believe it will offer asset and liability protection, which may be true in some cases. Second, they believe it will help resolve complex ownership or estate issues. That also may be true in some cases.”
The average person or couple usually doesn’t need an LLC to deal with those issues, he says. “It’s far more common in commercial or investment transactions for an LLC to be used for those purposes, and with good reason,” Gleason says. “When it comes to your own home, you can generally solve the liability issues by purchasing liability or umbrella insurance. The ownership and estate issues can usually be solved by holding title in a well-structured trust.”
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The Pros And Cons Of Buying A House Under An LLC
There are trade-offs to buying a house with an LLC. Let’s look at some of the perks and downsides of buying a home this way.
Pros
Some of the advantages of buying a home under an LLC include:
- Limited liability: As the owner of an LLC, you typically won’t be held personally liable for the company’s debts and liabilities. This can be especially attractive to real estate investors.
- Privacy: The LLC will be the name listed on the property’s public records, allowing you to protect your identity.
- Tax benefits: Buying a house with an LLC allows you to avoid double taxation because the LLC pays taxes on profits but the owner does not. Plus, IRS rules allow LLCs to use depreciation deductions, which allow you to deduct the costs of improving or buying a residential rental property, to further reduce their tax burden. These costs are spread over the property’s useful life, or 27.5 years, and the average annual depreciation is about 3.636%.
- Makes it easier to buy a home with others: If you want to buy a house with a friend or another investor, an LLC can simplify the business arrangement.
- Keeps your business and personal lives separate: Real estate investors may prefer being able to buy and sell property without it affecting their personal finances.
Cons
It’s also important to be aware of the downsides of buying a house with an LLC, including:
- More expensive: Setting up your LLC requires you to pay legal and permitting fees. Plus, lenders are more likely to charge an LLC a higher interest rate on a mortgage than they would an individual borrower.
- Potential difficulties in getting a mortgage: Lenders see lending to an LLC as riskier than lending to an individual, so you may have difficulty securing financing.
- Loss of the capital gains tax exemption: If you sell a house owned by an LLC, you’ll have to pay a capital gains tax on any profit. Individual homeowners don’t have to pay a tax on the first $250,000 of profit, but LLCs do.
- Loss of some property tax exemptions: Many states offer property tax exemptions or deductions if you own the home in your name and it is your primary residence. Homes owned by an LLC would be ineligible for these benefits.
“Just by owning a home in an LLC, you can potentially lose a homestead or primary residence exemption for property tax assessment purposes,” Gleason says. “Depending on the state that you live in and how much your property is worth, that can lead to a significant increase in your property tax bill. Even if you occupy the property as your residence, you may not qualify for the exemption, all because of the LLC.”
Should You Buy Your House With An LLC?
According to Gleason and Greene, buying a home through an LLC makes more sense for real estate investors than average home buyers.
“Owning a home in your own name is a lot simpler, but you can own it in an LLC if there are special circumstances that warrant it,” Gleason says.
“You would be doing yourself a disservice by purchasing a home through an LLC and living in it as a primary resident,” Greene says. “My advice is that if you’re looking for extra protection on your personal residence, you should look to your home insurance plan and make sure you buy increased amounts of protection correctly for unforeseen events.”
FAQ
Here are answers to some frequently asked questions about buying a house with an LLC:
The Bottom Line About Buying A House With An LLC
Buying a home with an LLC can be smart for real estate investors who plan to rent out the property and want to benefit from the protections that an LLC offers. Buying your primary residence with an LLC makes less sense because there are fewer advantages and higher costs.
Deborah Kearns
Deborah Kearns is an award-winning independent journalist with more than 15 years of experience covering real estate, mortgages and personal finance. Her work has appeared in the Wall Street Journal, Kiplinger, U.S. News & World Report, Quartz, CNN, Forbes, Fortune, Newsweek, The Associated Press and dozens of other outlets. She previously led content and communications at a Top 15 national mortgage company and held writing and editing roles at Bankrate, NerdWallet, LendingTree and RE/MAX. She holds a bachelor's degree in journalism from the University of Florida and a master's degree in public relations from Ball State University.
