The question of whether to hold real estate in an LLC is one that many investors ask themselves.

If you are asking this, you should know that there is no definitive answer for all investors. There are some things that can help point you in the right direction.

If your primary goal is asset protection then holding real estate in an LLC may not be the best option. The reason for this is that you are then subject to double taxation. That is, you would pay taxes at both the corporate and individual level on the same income.

One perk of holding real estate in an LLC is that it can allow you to avoid having to file a 1099 with your investor(s). Again, be sure to consult with a tax expert before deciding on this approach.

Another reason is that you can have greater protection from personal liability by holding real estate in an LLC. So if the property begins to decline in value and your investor(s) can no longer afford to wait for appreciation, they may decide to force a sale of the property. Although there may be some protection, you may still owe on any notes and mortgages regardless of whether the property is sold or not. There are no guarantees when it comes to real estate and personal liability, but holding real estate in an LLC can help provide a layer of protection.

So should you hold real estate in an LLC? The answer is not cut and dry. You may want to consult with your tax advisor or financial planner to help you understand the implications of holding real estate in an LLC.