At a crossroads, LLCs or Umbrella Policy?
Hi Bigger Pockets ,
This post is about a topic I've been struggling with for some time now. Here goes:
I began my real estate investing in 2017. I have a full time job, so i worked with some turnkey providers to purchase single family homes. Right now, my portfolio looks like:
Own primary residence
Own 7 single family homes in Memphis with 3 different management companies
Own 1 single family home in Birmingham with 1 management company (duh)
When I began this journey, I set up an LLC in Tennessee with a registered agent. As of now, I have transferred the first 4 properties I purchased into this LLC, but stopped from there. That means i have the remaining 3 Memphis properties and the Birmingham property in my own name.
Essentially, I am at a crossroads now. The dilemma I am facing is where I go from here with my entities. The scenarios I am envisioning are:
1) Transfer the first 4 properties back into my name, dissolve the LLC, and acquire a large umbrella policy to cover myself.
2) Create a second LLC in Tennessee for the remaining properties, an LLC in Alabama, and perhaps a parent LLC in Wyoming for asset protection.
For some context, I am planning to continue acquiring properties over the years, really with no limit in sight and will look to diversify to other geographic locations. Right now, the next property will be my 10th FHA loan, and I will need to secure financing elsewhere going forward, which is why i have paused at this stage to make sure I have my entities in order. But the 2 scenarios have me in analysis paralysis, and I simply don't know what to do.
Obviously, the 2nd scenario seems to make the most sense, but it's going to come with a steep cost, $1,000 per LLC, $300 annual registration fee per LLC in TN, not sure about Alabama or Wyoming but I'm sure there is a fee. On the other hand, ridding myself of the original LLC and getting the umbrella policy should be less expensive, but I'm nervous about the asset protection in this case. Am I leaving myself open to my personal assets being exposed? Is there a third option I'm not even considering?
Thanks!