Bought my first ever house witch is an owner occupied 3 unit multifamily house. A couple concerns, the house is from 1814 and I have some concerns of repairs down the line. Also, a concern about the being a liability to tenants. So currently, I bought the house under my name. It's owner occupied so I'll be living in it. I was wondering to put it under an LLC. I have people saying it has amazing tax benefits and I can claim things as a loss and I'll get a bigger return. But other people are saying not to since it will stir things up with my lender and may jack up my mortage and home insurance. Some people say keep it under umbrella insurance. Is that the default insurance when you buy the property or is that a separate entity? I'm confused.
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
4y
If you bought it in your name keep it that way. Speak to to your Ins agent and get liability ins to cover your assets. That is what liability insurance is for.
You get the same benefits whether it is in your name or LLC. LLC is a 'disregarded entity' as far as the IRS is concerned. I have properties in LLC and in my name, deductions etc are the same. Don't take advice from lay people. Get an accountant.
Umbrella insurance basically picks up where your homeowners insurance left off. Umbrella is good because you can merge your assets like cars, boats and homes under your umbrella for added protection.
Basically if you don't use an LLC, definitely get an umbrella insurance.
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
4y
If you bought it in your name keep it that way. Speak to to your Ins agent and get liability ins to cover your assets. That is what liability insurance is for.
You get the same benefits whether it is in your name or LLC. LLC is a 'disregarded entity' as far as the IRS is concerned. I have properties in LLC and in my name, deductions etc are the same. Don't take advice from lay people. Get an accountant.
Bought my first ever house witch is an owner occupied 3 unit multifamily house. A couple concerns, the house is from 1814 and I have some concerns of repairs down the line. Also, a concern about the being a liability to tenants. So currently, I bought the house under my name. It's owner occupied so I'll be living in it. I was wondering to put it under an LLC. I have people saying it has amazing tax benefits and I can claim things as a loss and I'll get a bigger return. But other people are saying not to since it will stir things up with my lender and may jack up my mortage and home insurance. Some people say keep it under umbrella insurance. Is that the default insurance when you buy the property or is that a separate entity? I'm confused.
You need to find and talk to a good asset protection attorney or company. Umbrella insurance is good, but it does not protect your personal assets from being attached in a lawsuit. Putting it into an LLC gives you that protection, and you want to do it before anything happens. I've personally deeded rental homes into LLC's after closing in my name, and the bank will not call the note due (the dreaded due on sale clause), as long as they get paid. For tax purposes and deductions, there is not a lot of difference having it in your name or the LLC, but you need to build a good foundation now. For a good review on the due on sale, see this article below: Changes to Due-on-Sale Clause Silently Enacted by Fannie Mae | Blog (biggerpockets.com)
Also, a good company with reasonable prices to help you structure your real estate can be found at:
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
4y
You need the umbrella policy. You are at least 10x more likely to do something personally to get yourself sued. You’re in a car crash that you caused? You can lose all your properties in all your LLCs. You forgot to have the ice removed and someone gets hurt, you can lose all your properties in all your llc’s. Almost anything that happens at one of your rentals will be your fault as well as the llc’s. You want the insurance company’s best lawyers working at their expense to protect them against losing money, that alone could save you more than most lawsuits in which case the llc wouldn’t have helped.