LLC's aren't a waste at all. It's just that establishing an LLC solely for rental property is. If you're going to do that with rental property, then you're better off creating an S-Corp for that. An S-Corp offers a significantly better veil of protection than does an LLC by far. The rental income is still passive.... but it's passive to the C-Corp and that passivity is passed to the owner in the way of distributions on the K-1 issued to the owner by the S-Corp.
You have to do other things too like ensuring that rent payments are made to the S-Corp, and not the owner.
I myself have three rentals, all in excellent shape and I'm extremely picky on selecting my tenants. None of them are in an S-Corp or LLC, as with $300K of liability coverage in my rental dwelling policies, I'm fine.
As for a citation, I've been a landlord for 25 years and when it comes to this stuff, I've been there, done that, got the T-shirt. I'm not willing to spend the inordinate amount of time necessary to "prove" myself. If my 25 years of experience isn't good enough for you, then I understand. You can always talk to a lawyer that specializes in tenant/landlord issues. A CPA or tax attorney would be knowledgable on the tax stuff, sure. But I wouldn't expect them to know sqat about anything beyond that when it comes to landlord/tenant issues. One thing I will point out though, is that since LLC's are a state thing, not all states treat LLC's the same when it comes to the legal protection. For my state of FL and a number of others, it's an absolute waste to use an LLC for rental property.
I've heard that KY treats LLC's for tax purposes at the state level, the same way the IRS treats an S-Corp at the federal level. But that's for taxes. Don't know if the "veil of protection" is any better though.
When it comes to the veil of protection, that's a state thing. I know in a number of states it's rather easy for a halfway decent lawyer to find ways to circumvent that veil and go after the property owner's personal assets. I've read cases online about this occurring in FL all the time, mostly in the Miami/Dade County area.
