LLC for Rental Property: Loans, Taxes, Fees and Liability (2026)

Who holds small rentals in an LLC: the Census 2024 survey

This page starts with the data. The government’s survey of who owns rental property is the Rental Housing Finance Survey, a HUD-sponsored survey run by the Census Bureau, which asks each sampled property for its “current ownership entity.” The 2024 public use file was released on February 19, 2026. We tabulated it with the survey’s own property weights; the margins of error are ours, computed from the file’s 100 replicate weights (our arithmetic), and they are wide because the file holds 825 records for 1-4 unit properties.

Margins are 90% (our arithmetic). “Individual investor” includes joint ownership by two or more individuals, such as a married couple, and the survey groups LLPs, LPs and LLCs in one category, so the LLC-only share is lower than the column. About 8% of properties have no reported owner type; leaving them out, the LLP, LP or LLC share of 1-4 unit properties is 22.5% (our arithmetic). What the table shows (our reading): among houses and small multiples, roughly one rental in five is held in a limited-liability entity, and the share passes half from five units up. The decision is not a default for small landlords, and it is not unusual either.

The lender test: when the loan decides the entity

A Fannie Mae conventional mortgage and an LLC do not mix at closing. Fannie Mae’s Selling Guide (B2-2-01, version of September 3, 2025) says it “purchases or securitizes mortgages made to borrowers who are natural persons” and lists three exceptions: inter vivos revocable trusts, HomeStyle Renovation mortgages, and land trusts in states where the beneficiary is an individual. A borrower must establish ownership by signing the security instrument, signing the note and “taking title to the property in the name of the individual borrower(s).” We did not read Freddie Mac’s equivalent text.

Fannie Mae’s count of financed properties (B2-2-03, 11/05/2025) has a feature that matters to LLC owners. Desktop Underwriter allows a maximum of 10 financed properties for a second home or investment property, and the count includes 1-4 unit properties “where the borrower is personally obligated on the mortgage(s).” The guide’s own example is a borrower with four two-unit investment properties financed in the name of an LLC in which they own 50%: because the borrower is not personally obligated, those properties are not counted. Whether a personal guaranty makes a borrower “personally obligated” is not answered in the section we read (our reading); ask the lender.

Lenders that finance rentals as business loans take the opposite position. Here is what each lender’s own website or guidelines say, read on October 12, 2026. These are the lenders’ statements, not our findings.

Our Kiavi review, Lima One review and Visio review carry the lender-specific facts; our DSCR loan in an LLC page has the guaranty thresholds and entity-document lists; the DSCR requirements and lender comparison pages do not mention entities at all. Putting the lenders’ words side by side, the premise that DSCR lenders require an LLC is only partly true: three of the five we read today state a requirement, one makes it depend on the state, and one lists the entity types it accepts.

Do borrowers actually use entities? In our own tabulation of the 2025 federal mortgage-disclosure (HMDA) data, the share of DSCR-type loans coded to a non-natural person varied widely by state.

This is a proxy, not a count of LLC loans (our reading): the coding records a non-natural borrower, and the state pages it comes from say they also catch other no-debt-to-income business loans. It does show that in some states most DSCR-type borrowers are entities and in others very few are, which is a reason to ask the lender rather than assume. Method and state detail are on our state pages, for example DSCR loans in California and in Ohio.

Deeding a mortgaged rental into your own LLC

The question after “should I form one” is whether the bank can call the loan when the deed moves. Two sources decide it, and our DSCR loan in an LLC page covers the lender mechanics in more depth.

• Federal law lists the protected transfers, and an LLC is not on the list. 12 U.S.C. 1701j-3(b)(2) says the exercise of a due-on-sale option is “exclusively governed by the terms of the loan contract,” and subsection (d) protects eight named transfers on residential property with fewer than five dwelling units, among them a transfer where “the spouse or children of the borrower become an owner” and a transfer into an inter vivos trust where the borrower remains a beneficiary (12 U.S.C. 1701j-3(d)(6), (8)). The regulation, 12 CFR 191.5(b), applies to “any loan on the security of a home occupied or to be occupied by the borrower,” which a rental is not (our reading).
• Fannie Mae’s servicing exemption is narrower than it sounds. Its Servicing Guide (D1-4.1-02, 08/13/2025) tells the servicer to process a transfer to an LLC without reviewing it only if “the mortgage loan was purchased or securitized by Fannie Mae on or after June 1, 2016” and the borrower controls the LLC or owns a majority interest, and it adds that the servicer must notify the borrower that the property “must be transferred back to a natural person in order to qualify for a refinance loan.” The same section says the servicer is “responsible for ensuring the transfer of ownership complies with applicable law.”

What that leaves for you to check: who owns your loan, what your note says, and whether the LLC deed triggers state-level charges described below.

What the LLC does to your tax return

For most landlords the federal answer is “nothing, by default,” and the paper trail is the same.

Two limits on that table. It is the federal default; states can tax the entity itself (next section), and whether an S election or a second member helps a particular landlord is a tax question we do not answer (this is analysis of public documents). And “disregarded” is a tax label, not a liability one: it does not erase the LLC for state law, which is why the next two sections exist.

State fees: what six states charge, with the statute or form

Each figure below was read on October 12, 2026 from the state’s statute, filing form or fee schedule. Georgia’s and Nevada’s official sites refused our download, so they are not here.

Ten years of the recurring state charge alone, with no late fees and nothing else added (our arithmetic): California $8,000, Delaware $4,000, Florida $1,387.50 at the form’s $138.75, Wyoming $600 at the minimum. Texas has no flat yearly fee below the franchise-tax threshold, and the New York schedule has no annual charge. Three details change the picture.

• California is moving the first-year price. The Legislative Information text of Revenue and Taxation Code 17941(g)(1) exempts an LLC from the tax for its first taxable year if it organized or registered on or after January 1, 2021 and before January 1, 2024, and by its own terms operates only for a year in which a budget measure appropriates at least $1 for the Franchise Tax Board. Paragraph (g)(2), added by Statutes 2026, Chapter 85 (SB 180, effective July 13, 2026), sets the first-year tax at $400 for taxable years beginning on or after January 1, 2027 and before January 1, 2030, for an LLC required to file under Section 18633.5.
• A home-state LLC pays the property state too. California’s tax applies to an LLC “doing business in this state” and to one whose articles or registration the Secretary of State has accepted (R&TC 17941(a), (b)(1)); New York charges a foreign LLC $250 to apply for authority (LLC Law 1101(k)). A Delaware or Wyoming LLC that owns a California rental therefore pays its home state and California (our reading).
• Delaware is $400, not $300. The Delaware Code section on taxation of limited liability companies says every domestic and registered foreign LLC “shall pay an annual tax … in the amount of $400.” A figure of $300, which one of our own older pages carried, does not match it.

New York’s publication rule is a cost and a deadline. Within 120 days of the articles taking effect, a notice must run once a week for six successive weeks in two newspapers designated by the county clerk, one weekly and one daily; if proof is not filed within the 120 days, the LLC’s authority to do business in the state is suspended (LLC Law 206(a)). The newspapers’ charges are not on the state fee schedule.

Property tax, stamp tax and homestead when the deed moves

Moving title is where an LLC can cost more than the filing fee. Three states, three different mechanisms.

California: reassessment turns on proportions. The Board of Equalization’s Rule 462.180(a) states the general rule: “The transfer of any interest in real property to a corporation, partnership, limited liability company, or other legal entity is a change in ownership of the real property interest transferred.” The exception is a proportional transfer: a transfer “by an individual to a legal entity” which “result solely in a change in the method of holding title and in which the proportional ownership interests in each and every piece of real property transferred remain the same after the transfer” (Rule 462.180(b)(2); Revenue and Taxation Code 62(a)(2)). A single owner deeding to a single-member LLC fits that exception (our reading); a deed to an LLC with other members, or one that changes shares, may not. The exclusion has a tail: the people who hold the LLC afterward become “original coowners,” and when they transfer more than 50 percent of the interests cumulatively, the property excluded earlier is reappraised (R&TC 64(d); Rule 462.180(d)(2)). A purchase or transfer that gives a person or entity control of more than 50% of an LLC is a change in ownership of the real property it owns (R&TC 64(c)(1)). California’s documentary transfer tax has a matching exemption for a transfer that “results solely in a change in the method of holding title” with proportional interests unchanged (R&TC 11925(d)).

Florida: the mortgage counts as consideration. Florida Statutes 201.02(1)(a) taxes deeds at 70 cents per $100 of consideration and says consideration “includes, but is not limited to … the amount of any mortgage, purchase money mortgage lien, or other encumbrance, whether or not the underlying indebtedness is assumed.” Read literally (our reading), a deed of a mortgaged rental to your own LLC is measured by the loan balance: on a $300,000 mortgage, 70 cents per $100 is $2,100 (our arithmetic). Section 201.02(1)(b) adds a “conduit entity” rule: when property goes to an entity without full consideration from a grantor who owns an interest in it, and the grantor’s interest is later transferred for consideration within 3 years, tax applies to that transfer.

Texas and Florida: the homestead belongs to a person. Texas defines a “residence homestead” as a structure “owned by one or more individuals, either directly or through a beneficial interest in a qualifying trust” (Texas Tax Code 11.13(j)(1)(A)). Florida’s exemption goes to “a person who, on January 1, has the legal title or beneficial title in equity” and makes the property his or her permanent residence (Florida Statutes 196.031(1)(a)). For a landlord who also lives in a unit, deeding the whole building to an LLC raises the question of the exemption on the unit (our reading); the statutes do not say the exemption survives.

Liability: what a charging order protects, state by state

The point of an LLC is that a judgment against you personally should not reach the building. That depends on two things the statutes answer differently: what a creditor of the owner can do to the owner’s interest, and when the LLC’s own liability reaches the owner.

What that means in plain terms (our reading): Delaware, Texas and Wyoming write the single-member case out of the foreclosure risk; Florida writes it in; California does not distinguish and lets a court foreclose after a showing; and in each state the charging order reaches the distributions the LLC makes, which is why how and when a rental LLC distributes cash is a question for a lawyer. Delaware, Texas and New York also say in nearly the same words that a creditor of a member may not take possession of the LLC’s property (6 Del. C. 18-703(e); Texas Business Organizations Code 101.112(f); New York Limited Liability Company Law 607(b)).

The other side of the shield is what the LLC’s own debts and the owner’s own conduct can reach.

• The liability line is statutory. An LLC’s debts “are solely the debts, obligations, or other liabilities of the limited liability company” and do not become a member’s “solely by reason of the member acting as a member” (California Corporations Code 17703.04(a)); Wyoming’s statute says the same in different words (Wyoming Statutes 17-29-304(a)).
• It does not cover your own acts or promises. California’s statute says the section does not affect a member’s liability “for the member’s participation in tortious conduct, or pursuant to the terms of a written guarantee” (Corporations Code 17703.04(c)). A landlord who personally guarantees the mortgage, as Visio’s and LendingOne’s documents above call for, carries the loan personally whatever the entity.
• Courts can look through the LLC. California applies “the common law governing alter ego liability” to a member and says the failure to hold meetings is not a factor where the articles or operating agreement do not require them (Corporations Code 17703.04(b)). Wyoming lists four factors a court “shall consider only”: fraud, inadequate capitalization, failure to observe company formalities as required by law, and intermingling of assets, and says no one of them except fraud is sufficient (Wyoming Statutes 17-29-304(c)). Texas applies its corporate rules to LLCs (Business Organizations Code 101.002) and bars liability on an alter-ego or formality theory, with an exception where the owner used the entity to perpetrate an actual fraud “primarily for the direct personal benefit” of the owner (Business Organizations Code 21.223(a)(2), (b)).

Insurance sits outside these statutes: they allocate liability, they do not pay claims. We make no recommendation on coverage; it is a question for an insurance professional and for the lender’s requirements. LendingOne’s guidelines, for example, say hazard insurance coverage “must be equal to the lesser of (1) loan amount and (2) full replacement value of the property.”

The beneficial-ownership report that landlords no longer file

Forming an LLC used to come with a federal ownership report. FinCEN’s Beneficial Ownership Information page, updated August 11, 2026, says it “has finalized its BOI reporting rule” and that “U.S. companies are exempt from the Beneficial Ownership Information (BOI) reporting requirements and therefore, are no longer required to file BOI reports.” The final rule became effective on August 14, 2026, and only certain foreign companies registered to do business in the United States must still report. A page that still lists a BOI filing in its checklist for a new U.S. rental LLC is out of date.

What a landlord can do with this

This section describes decision points the documents create. It is not advice, and an LLC decision for a property worth six figures belongs with an attorney licensed in the property’s state and a CPA.

1. Ask the lender first if you are borrowing. The lenders’ own words above differ: some require the entity, one makes it state-dependent, and Fannie Mae wants a natural person. Get the requirement, the guaranty threshold and the seasoning rule in writing before forming anything.
2. If a mortgage exists, ask who owns it. The Fannie Mae servicing exemption turns on a purchase or securitization date of June 1, 2016 or later and on your control of the LLC. Federal law does not list an LLC among the protected transfers.
3. Price the state, not the national average. Ten years of the recurring state charge ran from $600 to $8,000 across the four states above that have a flat yearly figure, before any late fee and before the property state’s own charges if the LLC was formed elsewhere (our arithmetic).
4. Ask which charging-order rule governs. The statute of the state where the LLC is organized and the law of the court that hears a judgment can differ, and a one-member LLC is treated differently in Florida than in Delaware, Texas or Wyoming. That is a conflict-of-laws question for the lawyer.
5. Check the transfer costs where the property sits. California reassessment and documentary transfer tax, and Florida stamp tax on the mortgage, are decided by the deed, not by the LLC filing.
6. Keep the tax default in view. Federal tax on a one-owner rental LLC is the same Schedule E picture; what changes it is a separate election or a second member, each with its own rules.

A fee-only financial-adviser match, the kind our other pages offer to people with money in a fund, is not the right help for this decision, because the open questions are legal and tax questions. If the numbers here change (a fee, a statute, a reporting rule), we can email you.

FAQ

Sources: Fannie Mae Selling Guide B2-2-01 (09/03/2025), B2-2-03 (11/05/2025) and Servicing Guide D1-4.1-02 (08/13/2025); 12 U.S.C. 1701j-3 (U.S. Code 2024 edition, GPO) and 12 CFR 191.5 and 26 CFR 301.7701-3 (eCFR, current to October 1, 2026); 26 U.S.C. 469, 1361, 1362 and 1402 (U.S. Code 2024 edition, GPO); IRS Single member limited liability companies (reviewed July 27, 2026), Instructions for Schedule E (2025) and Instructions for Form 8825; lender pages read October 12, 2026: kiavi.com/faqs, limaone.com/rental, rcncapital.com/faqs, visiolending.com/lending-process and the undated LendingOne broker guidelines PDF; California Legislative Information (Revenue and Taxation Code 62, 64, 11925, 17941, 17942, 23153; Corporations Code 17703.04, 17705.03), California Board of Equalization Property Tax Rule 462.180, Secretary of State Form LLC-1 and the Franchise Tax Board LLC page; Texas Constitution and Statutes site (Business Organizations Code 21.223, 101.002, 101.112; Tax Code 11.13), Secretary of State Form 205 and the Comptroller’s franchise tax page; Florida Statutes 196.031, 201.02, 605.0213 and 605.0503 and the Division of Corporations form cr2e047; New York Senate Open Legislation (Limited Liability Company Law 206, 607, 1101); Delaware Code Online (6 Del. C. 18-703, 18-1105, 18-1107); Wyoming Statutes Title 17 and the Secretary of State fee schedule (revised June 2026); Arizona Revised Statutes 29-3503; FinCEN Beneficial Ownership Information page (updated August 11, 2026); and the U.S. Census Bureau and HUD 2024 Rental Housing Finance Survey public use file, codebook and methodology page (tabulation, margins of error and the HMDA state shares are ours, with the script and output saved). Everything was read on October 12, 2026. This is analysis of public documents, not investment, legal or tax advice.