I am just getting started I have rented before I have one piece of real estate that I am trying to rent now I want to buy an apartment complex and keep building my portfolio. I just need a little bit of advice on protecting my assets. I would like to buy in multiple states what is the best way that I can protect myself from liabilities?
Real Estate Broker · Winthrop, MA · Member since 2014 · 260 posts · 199 votes
7y
Hey Tina, I work in Massachusetts primarily and use LLCs, one for each property is the safest. I'd consult with your local attorney or another local investor before making a final call. Some states have different laws for this type of stuff, but that doesn't mean you can't create your Llc where you live, and do biz in different states, but I think doing the opposite sometimes isn't suggested, ie: incorporating in another state than you live in. Someone recently gave me this advice when creating my newest LLC. but I'm no Atty! Good luck!
Investor · Charleston, SC · Member since 2015 · 113 posts · 50 votes
7y
You can create the LLC in any state as many used a Delaware LLC or a Nevada LLC years ago because of anonymity and some other law unique to these states but don't think it's common anymore. No need to file in the state you buy in as it complicates the taxes. I would just file in your own state and on contracts write a (whatever your state is) LLC.
I am just getting started I have rented before I have one piece of real estate that I am trying to rent now I want to buy an apartment complex and keep building my portfolio. I just need a little bit of advice on protecting my assets. I would like to buy in multiple states what is the best way that I can protect myself from liabilities?
@sam grooms has the correct answer. If you're going to have LLC's in multiple states, you will have to register as a foreign entity in each state. In many states, it's about $100. You could forego the LLC piece, take the less expensive financing, and get an umbrella liability policy that would cover your liabilities. Search it here on BP and read some of the discussions about the two. You'll get more than enough information and a variety of opinions.
Las Vegas, NV · Member since 2018 · 403 posts · 474 votes
7y
It's not always ok to just form an LLC in one state and do business in another. I think most states REQUIRE that you file with them as a foreign entity doing business in their state, if you have an out of state company.
You need proper legal advice from a professional, to do it correctly to best suit your situation. Not free advice from the internet.
Real Estate Agent · Phoenix, AZ · Member since 2016 · 69 posts · 83 votes
7y
@Tina Jenkins I am a MF investor in AZ. We have only purchased in Tx at this point. Each of our properties is in its own LLC. Our main LLC is out of AZ and is the managing member for each property. This adds an extra layer of protection for us. I am not an attorney and would HIGHLY suggest you contact a real estate attorney and have your CPA get involved as well. Each persons situation may be different. We do different LLC's for each property because it works best for us.
Either way- I would never suggest to have all of your properties under one llc.
Here is a group you can contact who can help you with asset and tax protection-
Denver CO · Member since 2015 · 69 posts · 9 votes
7y
my 2 cents-
i think that putting each property in its own llc is excessive, unless said property is a commercial property. If you are just buying SFR maybe stick to 3 or 4 properties in each LLC. I think basic umbrella insurance would cover everything you are looking for without the additional tax filings and costs associated with each LLC.
i dont know why investors preach to have each property in its own llc when discussing SFRs
What you're getting on the public forum is just an opinion. If you need an advise on how to protect yourself from liabilities, reach out to asset protection attorney.
Attorney · Wilsonville, OR · Member since 2017 · 504 posts · 411 votes
7y
@Tina Jenkins I am an asset protection attorney specifically for real estate investors. You will want to talk to an attorney over the phone to go over your personal situation, your state, your current assets, liabilities, if you are under attack or not, what your short and long term goals are, where you are investing and possibly if you will be investing out of your current state.
The name of the game for asset protection is to get the properties you own in you personal name out of your personal name, and into your LLC or Series LLC and preferably connected via a land trust. This is different then an estate plan trust. This is specifically for asset protection.
Their are lots of ways to skin the cat with asset protection. Their is no 'one best way.' Every person is different. Its not about what you make but what you keep, and not owning anything but benefiting from everything.
I also see some misconceptions on what asset protection is and its purpose. Some view asset protection planning with a skeptical eye. They believe there is a moral obligation to pay one’s debts. They think that asset protection planning is immoral because it prevents a creditor from collecting on a judgment entered by a court. The U.S. justice system is unpredictable. Defendants are faced with ever-expanding theories of liability, being sued just because they appear to have “deep pockets,” and judgments entered against them based on desired outcomes instead of the law.
Attorneys may ethically and legally help clients protect their assets from future creditors, predators, and lawsuits. Asset protection planning is a legitimate form of wealth planning. Attorneys who engage in asset protection planning help their clients preserve and protect their property in advance of a claim or the threat of a claim. Again it’s about setting up the system in advance, before, a threat. Nothing wrong or fraudulent about that.
The idea is to attack the incentive and damages and make it not worth the time to get to you and through the system. To provide an incentive for settling a claim, improve the client’s bargaining position, offer options when a claim is asserted, and, ultimately, deter litigation. On the other hand, asset protection planning is not about avoiding taxes, keeping secrets, hiding, or fraud.
Asset Protection really comes down to making it as difficult as humanly possible to tie the assets to you.
Asset Protection is built around the business concepts of insurance and law firms. The insurance industry is a business built around making a profit. Insurance is great, and I strongly say get it and as much coverage as you can get, but if a large claim does come due to negligence etc, You will most likely be suing your insurance provider while being sued yourself. Not a good situation. The next is that the litigation industry is also built around making money - as well as upholding the law. If a firm has to decide between pursuing you or another case, and you have a very time consuming and expensive protection system they have to try to get through, they will most likely take the other case. Both industries look for the path of least resistance toward making their financial goals. To survive they must make profit.
Thank you for your very educational response. I did however contact an attorney and form and LLC the other day. I will most likely be contacted you to form one in the states you serve as I feel you are a very knowledgeable lawyer and I would like to work with you in the future.