Asset Protection

[Mark Smith]

I am about to jump into my first deal, but I have been trying to learn as much as I can about asset protection.  I really don't want to get myself into any trouble, so I'd rather be safe than sorry.

I'm thinking about forming an LLC. From what I understand, the best thing to do is form an LLC for each property. I'm wondering what the tax consequences are of having an LLC. And what happens someday when I have 25 properties? That seems like it would be a really expensive tax season when it comes to paying to file returns.

I have also thought about an umbrella insurance policy, however the point was brought up to me that "if one of your tenants eats a chip of lead paint, a $1,000,000 policy may not go very far."  So now I'm not sure.

So the basic question is, what is the best, most cost effective form of asset protection?  I'm willing to pay a little more for good protection, but I don't want it to ruin the potential cash flow of the property.

Thank you!

[Soh Tanaka]

In my opinion, if you decided to purchase your first deal without any entities, it's not a big mistake, if at all. However, if you think too much and ended up not buying anything or over complicate your asset protection, that could be a big mistake.