Asset Protection

2 Replies

Newbie investor, I've dedicated myself to investing in financial education and building a team before taking that first step. As a buy and hold investor investing for cashflow, I feel like before I acquire my first property, I should invest in an entity to protect my assets... What would a wise and experienced investor do?

If you are going to use a normal personal loan to purchase your property so you can lock in awesome interest rates for 30 years then get out and go buy a property! Your entity is worth very little if the asset is in your personal name. Once you get sued the plaintiff may very easily demonstrate there is no separation between yourself holding the loan and deed and your LLC that just tracks numbers (pierce the veil). Just get an umbrella policy.

If you are able to get commercial loans with your not-yet existing entity, then establish it first. Otherwise, you have nothing to protect.

Hi Alejandro

Getting started as a real estate investor brings about a lot of questions and concerns about staying safe and protected while putting your skills and money to good use. First and foremost is to get educated. Read as many books as you can especially the ones from Robert Kiyosaki and Ken Mcelroy, they have whole chapters dedicated on asset protection. 

This is what I have learnt so far and how I do it on SFRs ,these are not in order of timing but of personal importance/rank in order:

1. The first step to asset protection is to follow codes and be uptodate on your property and not to cut corners. I got a good Property manager who follows the law to the book and is uptodate with building codes and regulations. Remember getting a insurance policy and forming an entity will not protect you from criminal negligence.

2. Next I get insurance on my rentals. I get hazard insurance with a $1M personal liability to protect me and my PM.

3. Finally I form an LLC and have my attorney transfer the title of the property into the LLC and I learn from my attorney how to operate it and run it so that the veil of the LLC is not pierced.

Hope it helps and good luck in your investments

Bhaskar

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