Real Estate Investor · Blackwood, NJ · Member since 2009 · 79 posts · 10 votes
Hi guys,
I know it has been asked in many different ways before but I am looking for a more specific answer. My question is: Why have an LLC when you can just get an umbrella policy for 'x' million dollars on your properties. What will the LLC do for you that the insurance policy won't?
Let me just say I have an LLC and I think they are the way to go. My attorney, accountant and bascially every investor I have talked to said they are the way to go but I recently had a group of investors say that an insurance policy is good enough and the LLC isn't worth the hassle.
After thinking about it I am not so sure there is an advantage over the umbrella policy. What are your thoughts?
Joe Salimao
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
17y
Other than the cost, what possible disadvantage could there be?
Thats true which is why you would still need to personally guarantee the loan unless you use a non-recourse lender.
Of course you can. I just prefer to have the extra layer of protection via the LLC and there are disadvatages to a DBA such as the city wanting to tax your receipts.
I would not say "most", but you are correct that many do start off without the entity and then once they have multiple properties, transfer them into an entity.
That is simply bad information. Only a person who sells entity formation services would suggest such a thing. You can have 100 properties in one LLC, it is not the number of properties that should be the determining factor but the amount of equity exposure you are willing to "risk".
Again, the set number of properties is incorrect, as is a set amount of worth. It is the amount of equity at risk that is the determining factor. :D
Melbourne, FL · Member since 2014 · 4 posts · 0 votes
12y
So one of the reasons you put rental properties (defined as a dangerous asset) into an LLC is so they cannot penetrate out of that entity and get into some of your other assets such as your cash savings (safe asset). So, put your safe assets such as bank accounts into a Limited Family Partnership, this has advantages for estate planning as well, at the very least.
LLC are truly great for a layer of protection, BUT, there are costs. Department of Corporations wants their cut (approx. $500). Agent wants their cut ($225). Question is, for $725, how much of an Umbrella Policy can you get . I know I got $3 Million for approx. $800.
Now if you have multiple LLC's, you can you can be paying over $1400 just to maintain just two LLC's. Now, I haven't checked, but I think you can get a boat load of coverage, if they offer it, for $1400.
AND, if you put your safe assets onto a FLP, you got that insulated as well.
Bethlehem, PA · Member since 2009 · 46 posts · 1 vote
10y
I know this is an old post, but if a property is purchased with an LLC...
besides homeowners insurance is there any other insurance to get.
If i purchased umbrella insurance and the home is in the LLC would it still protect my personal assets?
I guess I'm confused if its an LLC and someone gets hurt on the property... what kind of insurance would be needed to cover that and would it be under the LLC, me or an umbrella policy?
Small Business Owner · Fallston, MD · Member since 2014 · 145 posts · 20 votes
8y
Aren't you uncomfortable writing your name on all the leases that you do with your tenants? What if you piss off a wrong guy and he/she comes to your house and does anything wrong with you? I only have 1 property and I am leaning towards LLC so hard because I really don't want any tenant to know my address, at the same time, my house address is on mortgage paperwork and in Maryland it's public. Either way, I think if a tenant is tech savvy, it won't be hard for them to find my address. As always, of course I will do background check and whole nine yards first. Thanks.
I just had the same talk with two attorneys today and both said skip the llc for properties. Just do an llc if you want for the management side, but like you, i do some repairs myself and hire others out....depends on my schedule and the complexity of the job. regardless of llc, what i fix, i am liable for. both attorneys are experienced with piercing the corporate veil but said frivolous lawsuits against landlords are not common. if you run your business right, your risks are low....insurance will take care of the rest if you buy enough. if you are negligent, shady or plain wrong, you are screwed and deserve to lose.
i will look into the llc for my management company but will stick with owning properties in my name until i get enough to take the next step...possibly as i get 4 or 5 paid off, then transfer them and lump 4 or 5 together. at some point i will pass the point of consumer type loans and will have to go to the commercial lending side but am avoiding that as long as i can. i am also looking into getting a realtor license so i can eventually become broker to assist my investing and possibly manage rentals for others....looking for ways to get out of my current job and replace income. Rentals is not a get rich quick game. I own 3 and need about 25 more minimum.
Bradenton, FL · Member since 2017 · 168 posts · 39 votes
8y
Alright...instead of confusion. We all obviously want protection here.
How about this: I have a 250k duplex in an LLC, went to AllState insurance that I use to insure my dwellings including the rental business. Then in addition, Added an extra 1 million to my already 1 million umbrella policy for my protection with the LLC listed under the policy.
Investor · Wheat Ridge, CO · Member since 2009 · 78 posts · 8 votes
8y
Hi Marty,
I do the 2 million on the umbrella as well (costwise it seems to make sense). Upped it a couple of years ago. My attorney also set up individual trusts for each rental I have a few years back. I guess if there was one right way to do this, we'd all follow that example as there's always an argument against.