Land Trust or LLC for Rental Property

I am buying a house in California to operate as a rental property. I'm not sure if it is better to put it in a LLC or a trust? Please share any insight.

2 Answers

This is probably an excellent question for an Attorney, sadly, I am not one of those.  I would probably contact a local attorney in California and start there. 

If you are asking based on obtaining a mortgage, I would say that you will find more lenders that will accept a Trust and still do conventional financing with competitive rates.

I know of very few lenders that will accept an LLC, and those that do, are typically much higher rates, or otherwise known as "Hard Money" lenders.  (the name itself is kind of a giveaway)

Hope that helps and good luck!

Should an investor structure an LLC, Land Trust...or both? 

This is an excellent legal question and I turned to William Bronchick, one of the best legal experts in real estate to provide the answer.  Basically, Attorney Bronchick states that the land trust is a privacy devise that keeps the public from knowing what you own.  The land trust creates a layer of privacy of ownership by creating a shield which is only know to the trustee and the beneficiaries of the trust.  The trust is not recorded anywhere in public records.  The only way to uncover the owner(s) of the trust is to ask the trustee who is not required to reveal the ownership unless under a court order.

The beneficiary of a land trust has liability of the property and would be liable for anything that would occur on the property.  The land trust will give the beneficiary some protection form contractual disputes such as unpaid property taxes, HOA dues, and perhaps tenant disputes.  Negligence claims or liability claims are best protected by an LLC.  The LLC is the beneficiary of the land trust on the second layer.   

The goal or objective is to maintain a layer of privacy protection combined with a layer of liability protection.  So the response is not one or the other but to obtain both the LLC and Land Trust working together.  It is always best to consult with a qualified licensed attorney in your state to obtain specific information and guidance for your situation.