One of the most common questions I get from real estate investors is: “How many rental properties should I put into one LLC?” For maximum protection, I recommend placing one rental property per limited liability company (LLC). This is the best structure for rental properties because it isolates liability, offers rental income protection, and reduces legal risk. It’s a critical decision that impacts not just your liability risk, but your financial future.

While many online sources focus on protecting property equity, that approach misses a far more important piece: your income. In this blog, I’m going to break down the LLC strategy that prioritizes income protection, not just asset protection.

Want a deeper dive into this strategy? Watch the full video here, where I discuss how many properties you should place in an LLC and why it matters for protecting your income.

Key Takeaways

• For maximum legal protection and income preservation, form an LLC for each rental property.
• Disregarded entities allow for tax simplicity—no additional returns required.
• Grouping multiple real estate investments into one business entity is only advisable after reaching a strong cash flow threshold.
• Risk tolerance, property characteristics, and profit levels should guide your grouping strategy.
• Protecting income—not just equity—is the smartest long-term approach.

Why Traditional Advice Falls Short

Years ago, I used to recommend grouping rental properties based on equity value. For instance:

• If three properties had a combined equity of $500,000 or less, I’d say one LLC might be enough
• I never recommended placing more than five properties in a single LLC

That made sense when the main goal was protecting equity. But I’ve learned a lot since then—and changed my advice.

The big flaw in that thinking is this: Equity doesn’t support your lifestyle. Income does.

You can’t pay for groceries with equity. You can’t fund your retirement with it either—at least not until you sell. 

It’s your rental income that pays the bills and gives you freedom. That’s what we need to protect.

The Real Goal of Your LLC Structure

Most of us invest in real estate for cash flow. Sure, appreciation is nice—but it’s the monthly income that matters.

The problem is, if a tenant sues you and wins, they can go after everything owned by the LLC that holds the property. By transferring multiple properties to that LLC, you’ve exposed your entire income stream from those properties.

That’s why you need a structure that isolates risk—so a problem with one property doesn’t affect the income from the rest.

My Recommended Approach: One Property, One LLC

Start with One LLC per Rental Property

Here’s why that makes sense:

• If something goes wrong with one property, only that property is at risk
• Your other income streams remain protected
• It’s easy to grow this model as you scale

And here’s the kicker—this won’t increase your tax burden. When you set up your investment properties under disregarded entities, these LLCs don’t file separate tax returns. You still report the income on your personal tax return, just like before.

Pro Tip: A disregarded LLC is essentially invisible to the IRS. It’s a powerful structure that gives you legal protection without tax complexity.

Scaling Up: How Many LLCs Make Sense?

This is where strategy really starts to matter.

Begin with Maximum Protection
If you’re just starting out, one lawsuit could wipe you out. That’s why I tell new investors to stick with one property per LLC while their portfolio is still small.

Shift as You Build Wealth
Once your cash flow is strong and your lifestyle is covered, you can take on a bit more risk. That’s when it might make sense to:

• Group two or three low-risk properties into a single LLC
• Group based on income levels, property condition, and tenant risk

Some of my clients with 120+ properties have formed over 100 LLCs. Others consolidate after 10 or 20 properties. It depends on your comfort with risk and your specific goals.

Don’t let an inadequate LLC framework compromise the security of your investments. Book your Free Strategy Session and get a custom LLC plan tailored to your investment strategy.

Why One-Property-Per-LLC Works

This strategy gives you a ton of benefits that go far beyond surface-level protection.

• Isolates Liability from Tenant Lawsuits: If something goes wrong—say a tenant gets injured on one of your properties—you don’t want that legal claim to spill over into your entire portfolio.
  
  One LLC per property ensures that the lawsuit is contained. The worst-case scenario is losing that specific property, not everything you’ve worked to build.
  
• Protects Your Income Stream: Your cash flow is the lifeblood of your real estate business. If multiple properties are owned under one LLC and a lawsuit arises, all income from those properties is potentially at risk.
  
  Separating properties into individual LLCs ensures that a legal claim tied to one doesn’t disrupt the rental income from your other assets.
  
• Simplifies Bookkeeping and Profits and Losses Tracking: Isolating each property in its own LLC makes your financials more transparent.
  
  It’s easier to track income and expenses per property, determine profitability, and make data-driven decisions about holding, selling, or reinvesting.
  
  This structure also simplifies the tax implications. You can clearly leverage the tax advantages for each investment property.
  
  And when you’re juggling separate filing fees, categorizing deductions, and managing depreciation schedules, it can make your job as the business owner a lot easier.
  
• Prevents Cross-Contamination of Risk: Every property carries its own set of risks—different tenants, state laws, different state requirements where the property is located, and maintenance issues.
  
  Bundling those properties together creates a domino effect. A single mold issue, slip-and-fall case, or housing code violation could jeopardize everything.
  
  One LLC per property stops risk from cascading throughout your portfolio.
  
• Adds a Layer of Anonymity and Separation: In addition to legal insulation, structuring properties in separate LLCs can create an element of privacy. It becomes harder for someone to trace all your holdings back to you.
  
  This level of anonymity can deter lawsuits in the first place or weaken a plaintiff’s claim by limiting what they can discover.

Over time, this structure becomes your foundation for long-term scaling, easier transfers of property, smoother estate planning, and clean exits. Whether you’re bringing in partners, selling properties, or passing wealth on to heirs, the one-property-per-LLC approach creates maximum flexibility with minimal disruption.

Final Word: Don’t Let One Lawsuit Derail Everything

When you’re early in your investing journey, one legal mistake can be devastating. A single injury claim, contract dispute, or tenant issue could result in a lawsuit that puts your entire portfolio—and your future income—on the line. 

Most investors underestimate just how financially damaging even one claim can be until it’s too late. This is why it’s critical to put the right protections in place from the start. 

A properly structured LLC strategy doesn’t just shield your assets—it preserves your income, maintains your privacy, and allows you to confidently scale and transfer property to an LLC or business structure.

As you grow, your legal entity should evolve with you. That’s where our team at Anderson Advisors can help. Whether you’re managing two properties or scaling to twenty, we’ll guide you in creating a tailored strategy that balances protection, simplicity, and tax benefits.

If multiple properties are owned under one LLC and a lawsuit arises, all income from those properties is potentially at risk. Invest in the right foundation, and you’ll be able to grow your real estate business with clarity and peace of mind.