If you are an investor considering using your LLC to get a mortgage for a rental property, think about the benefits and risks. How you organize your investment may make all the difference if it is successful or not. Consider, then, the: 

  • Pros and cons associated with using an LLC for rental properties 
  • Tax benefits for LLCs 

This structure is great for small investors who do not have employees. It is also good for entrepreneurs who have only one or a few properties and set up the entity as a sole proprietorship.  

Pros and Cons of Using an LLC for Rental Property with a Mortgage 

Whether you should use your LLC to get a mortgage for your rental property depends on several factors. There are, after all, advantages to setting up a company to own your investment real estate. There are also some key disadvantages.  


There are advantages if you use this approach. Roof Stock says that these include: 

  • Asset protection due to limited personal liability 
  • Limits liability due to personal injury, partnership disputes, or bankruptcy 
  • Establishes a business payment and credit history 
  • Pass through taxation 

These benefits are great for individuals who want to invest because it limits personal exposure. Therefore, if something goes wrong, you will not have to declare personal bankruptcy.  


There are also important disadvantages if you use your LLC to buy rental property with a mortgage. The biggest disadvantages, then, have to do with financing

  • Banks scrutinize your personal and your business’s records, so there is more paperwork. 
  • Lenders almost always charge a higher interest rate. 

Mortgage companies ask for the same documentation that you provide for a regular home loan. However, they also want financial records from the property you buy and from your business. Sometimes this gets complicated. Also, they charge a higher interest rate because of increased risk. 

Tax Benefits

You may find tax benefits if you use your LLC to get a mortgage for your rental property. In fact, there are three major tax advantages. They include: 

  • Pass through taxation – Report business income on your personal tax return 
  • Separate business and personal expenses 
  • Mortgage interest deduction – Because you report the income on your personal tax return 

These advantages, then, make it appealing for small real estate investors to set up LLCs for their purchases. 

Final Thought on LLC for Rental Property with a Mortgage 

Many people use LLCs to buy rental properties with a mortgage. In fact, the liability implications make it appealing for most small investors. Further, he government, makes it even more appealing because they allow pass through taxation. This means, then, that you put your company’s income on your personal tax return. moreover, this allows you to get the tax benefits of an individual. Therefore, In many ways it’s the best of both worlds.  

This only works for small, sole proprietors, though. If you have large investments, employees, and/or partners in your enterprise you need to look to other structures and entities. Also, be careful with FHA loan requirements.

Frequently Asked Questions