How to protect my asset besides using an LLC or Corporation?

4 Replies

I have plan on buying a duplex and house hack by renting one side and Airbnb the other side. The plan was to purchase the duplex and than put it under an LLC to protect my asset. I was told I can't because I would be putting 5% down payment and in the eyes of the bank I am going to live in it. Supposedly if I would put the duplex under a LLC I would have to pay the property off in 90 days. Is this true? If is true, than how can I protect my asset in case someone wants to sue me?( not that I'm expecting to be sue but you always should be prepared for anything)

Help please! Gracias!

Every lender has their own rules, but in pretty much every residential mortgage contract, there is a clause that triggers if the property is sold or transferred to another person or entity and this is known as the 'Due on Sale' clause. Re-read your contract to be fully aware of what the stipulations are in regards to this. 

As far as protection, an umbrella policy can be sufficient for protection, but you'd want to talk this over with an insurance agent and probably a lawyer as well as I am neither of these things.

@Joel Gierbolini - talk to your insurance broker (who holds your auto policy) about an umbrella insurance policy. $1MM-$2MM policy should be <$200/month. 

Updated 5 months ago

<$200/year not month.

A good landlord policy and corresponding umbrella policy is what you need.

It’s rarely worth the LLC investment with only a few units, and as you’ve found, it makes finding money harder (or at least more expensive)

A $1M umbrella policy will protect you from just about anything. Also go through the property inside and out and see what you can do to make it safer and less likely to be a trip/fall hazard.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.