I've been reading relentlessly on here about this topic, but I'm hoping someone can give me some advice before consulting an attorney. This would be our first rental.
Purchasing a rental property with someone who has decent net worth. We were looking in to a LLC for personal asset protecting for them. They don't want to have the income pass to them through the LLC so can we create a single member LLC and have both listed on the mortgage?
Are we better off putting the title in my name with both on the mortgage and have a good umbrella policy for myself?
Would it matter either way if both names are on the mortgage?
an LLC does not provide legal protection against a law suit, it just limits the amount of financial damage to what the LLC owns. If the LLC owns the property you can still lose the property, but it offers some protection for any assets held outside the LLC. It is your last line of defense after your property insurance has not protected you and your umbrella insurance has failed as well. Most important thing is to provide a safe rental property and practice good business so you don't get sued in the first place. Next absolutely get an umbrella policy. Your lawyer will advise you about the LLC, but as far as I know it does not matter who is on the mortgage in terms of asset protection. However your bank may not like it if you hold title in an LLC. In the end it is a judgement call you and your partner have to make. Being on the title comes with rewards and risks.
Proper insurance which would include an umbrella or excess policy is good first line of defense and an absolute must. I have seen several instances, however, where insurance isn't in place or a carrier tries to disclaim coverage leaving the owner exposed to liability. In such a case, an LLC will limit the owner's liability to the assets owned by the LLC provided that its run properly (keep the LLC separate from your personal accounts). If you were to hold title solely in your name then all the liability is yours regardless of your partner's involvement.
Another point is since you are purchasing with another person, the LLC operating agreement can define each of your roles and responsibilities. If the "you know what" hits the fan between you and your co-owner, at least there will be an agreement governing what should happen.
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