Can an LLC Buy a House? A Comprehensive Guide for Real Estate Investors

Buying residential or commercial property through a limited liability corporation (LLC) is a strategic approach many real estate investors consider. But can an LLC buy a house? The short answer is yes—but there are significant financial, legal, and structural considerations you’ll need to navigate first. This guide breaks down what you need to know before using an LLC as your vehicle for property acquisition.

Why Real Estate Investors Turn to LLCs

The primary appeal of purchasing property through an LLC centers on liability protection. When you hold investment properties under an LLC structure rather than in your personal name, you create a legal separation. If a tenant takes legal action, they’re suing the entity—not you personally. This shield becomes invaluable in litigation-heavy scenarios.

Beyond liability, tax-advantaged ownership attracts investors. Depending on how your LLC is structured, you can benefit from pass-through taxation, where the entity itself doesn’t pay corporate taxes. Instead, profits flow to members who report their shares on personal returns. This avoids the double taxation trap that traditional corporations face.

There’s also the partnership advantage. An LLC structure facilitates multiple investors collaborating on the same deal, whether through equal partnership or tiered equity arrangements.

The Financing Challenge: Getting a Mortgage for an LLC

Here’s where the reality hits: can an LLC get a mortgage? Most traditional lenders say no.

Conventional loan programs, FHA mortgages, and Fannie Mae or Freddie Mac-backed financing typically won’t extend credit to LLCs directly. Lenders view LLC borrowing as higher risk—if the entity defaults, the lender has limited recourse compared to lending to an individual with personal liability.

This creates a financing gap. Your options narrow to:

Alternative lending routes - Asset-based lenders, private money lenders, or portfolio lenders (banks that keep mortgages on their own books) will sometimes work with LLCs. Expect higher interest rates and shorter amortization periods.

Personal purchase followed by transfer - Buy the property in your name, then transfer it into the LLC. This works but triggers potential complications: deed transfer taxes, title insurance recalculation, and most critically, your mortgage’s due-on-sale clause. If triggered, you’d owe the entire remaining balance immediately.

The Cost Factor: Why LLC Ownership Isn’t Cheap

Setting up an LLC involves upfront expenses. Initial formation costs vary by state—typically $100 to $1,000. Then there’s the ongoing maintenance: annual filing fees ($50 to $300+ depending on your state), registered agent services, and tax compliance work.

When you layer in financing challenges, costs multiply. Higher interest rates on alternative mortgages, larger down payments, or relying on cash purchases all squeeze your return on investment.

Tax Advantages and the Tradeoff

An LLC purchase eliminates the primary residence capital gains tax exemption. Homeowners can exclude up to $250,000 in gains (or $500,000 if married filing jointly) when selling their primary residence. An LLC-held property doesn’t qualify for this benefit since it can’t be your residence.

However, you gain other tax tools. Depreciation deductions allow real estate owners to deduct the theoretical wear and tear on improvements, significantly lowering taxable income despite the property generating cash flow. This creates powerful tax-deferral opportunities.

The tax calculus depends entirely on your specific situation—which is why consulting an accountant or tax professional isn’t optional; it’s essential.

Legal Boundaries: The “Piercing the Veil” Risk

Can you live in an LLC-purchased house? Legally, no—not if you want liability protection to hold up in court.

If you purchase property through an LLC for investment purposes but then move in and use it as your residence, courts may disregard the LLC during litigation. This “piercing the corporate veil” scenario eviscerates your protection. The property must genuinely function as a business asset, not a personal residence.

This means the LLC structure works for rental properties, commercial buildings, and investment real estate—not for your primary home.

Making the LLC Purchase Decision

Can an LLC buy a house for investment purposes? Absolutely. Should you? That depends on:

• Your liability exposure (rental properties in litigious areas benefit most)
• Available financing options in your market
• Your tax situation and total portfolio structure
• Your willingness to accept higher upfront costs for long-term protection
• Whether the property will remain a true business asset

Investors with multiple properties, those in high-liability industries, and those partnering with others typically find LLC ownership justified. Solo investors buying a single rental property might find the cost-benefit less compelling.

Before You Move Forward

Don’t navigate this alone. A financial advisor can model whether the LLC tax structure actually benefits your specific situation. An accountant can optimize your entity selection and filing approach. A real estate attorney can ensure your LLC is properly structured, your operating agreement is sound, and your purchase aligns with your liability goals.

The question “can an LLC buy a house” has a clear answer: yes, it can. Whether it should is the strategic question that requires personalized guidance.