LLC or Trust

[Brian Smith]

Hello all,

I'm new to REI and I have a question pertaining to LLCs and trusts. Here's a quick intro to my current situation. Currently in the process of purchasing my first three family. I plan to house hack the property. It has been brought to my attention that I should be placing this property under an LLC to protect myself from any liability issues that may arise in the future. I spoke with my lender to make sure changing the name on the title after closing wouldnt affect the loan. The lender advised me that placing the property under a living trust might be a better approach since I plan to refi in the future. Having the property under an LLC would make a commercial loan my only option thus defeating the purpose of the refi. After some research it seems a living trust doesnt protect you liability wise, an LLC would. Which option is going to benefit me the most when it comes to protecting my assets, an LLC or a Trust?

Thank you in advance.

Best Regards,

Brandon Buoniconti

[Brian Smith]

Quote from @Henry Clark:

Definitely keep asking questions and learning.  There are many different tools.

1.  Clarify.   This is a 3 unit multi family you plan to live in one of them.      
2. LLC is one protection from liability to your other assets. Do you have other assets or revenue streams you're concerned with at this time? Can always move this property to an LLC at a later time.
3.  Your rental agreement and your operating procedures are your next line of defense.  Example.  Do you require the tenants to carry tenant insurance?  Do you put salt out after snow and ice?

4.  Insurance coverage.  Do you have the proper coverage?     Is this just a house hack or you also renovating?  Do you have construction insurance?

Recommend you make a list of every concept surrounding your type of investment and learn them.  Otherwise you will trip over them as you go.  

Sounds like a great investment to start with.  Good luck.  The education will be more

Valuable than the investment.  Congrats. 

Henry,

Thank you for your reply. 

As of right now, I don't have any big assets I'm particularly worried about. More so concerned about planning for the future. 

I do require tenants to carry renters insurance. It is a great added line of defense at no cost to me. As for salt after a snow event, yes maintenance and upkeep is a big thing in my opinion. Firm believer that it is better to be proactive than reactive. 

On the insurance side of things. Tomorrow, I'm going to speak with my agent about extra coverage. This will be just a house hack. The property is fairly modern. In my area the maintenance fees on an LLC are roughly $500.00 a year. I could add that money to my insurance policy instead. 


Thank you again for the advice. 


Best Regards,
Brandon Buoniconti