Rental Property Investor · Round Rock, TX · Member since 2016 · 1k+ posts · 971 votes
8y
Asset protection is insurance against litigation. And while not perfect fool-proof (it doesn't prevent from being sued), it acts as a deterrent by minimizing the target and making it appealing. That being said, you do need to have something to protect: substantial personal assets, substantial equity in your investment properties (otherwise the mortgage deed itself acts as a deterrent) and/or cash flow.
@Ryan Blake is not wrong, if you get sued, the attorneys and courts will work to uncover the chain of ownership. But the main idea is to make it difficult and expensive to sue - and often the attorney works on contingency and if he can't find what you own without substantial expense, he might not be in a rush to sue you and look for an easier target/client.
Lender · TX · Member since 2018 · 936 posts · 713 votes
8y
@Ron D. I don't think many REIs go to this degree of asset protection. Not because of laziness but because by most accounts it is not necessary. What is your reason for seeking anonymity? You assets will be protected from a basic LLC if you haven't blurred the lines of ownership and keep everything separate from your personal accounts.
I may be wrong but if your legal entities are sued, the courts will often unwind the flow of ownership. Not that you will be liable but that the structure will become visible. The only real protection is from someone just searching for ownership on their own accord.
Rental Property Investor · Round Rock, TX · Member since 2016 · 1k+ posts · 971 votes
8y
Asset protection is insurance against litigation. And while not perfect fool-proof (it doesn't prevent from being sued), it acts as a deterrent by minimizing the target and making it appealing. That being said, you do need to have something to protect: substantial personal assets, substantial equity in your investment properties (otherwise the mortgage deed itself acts as a deterrent) and/or cash flow.
@Ryan Blake is not wrong, if you get sued, the attorneys and courts will work to uncover the chain of ownership. But the main idea is to make it difficult and expensive to sue - and often the attorney works on contingency and if he can't find what you own without substantial expense, he might not be in a rush to sue you and look for an easier target/client.
Attorney · Austin, TX · Member since 2014 · 1k+ posts · 932 votes
8y
Hi @Ron D.. I'm a Texas-based real estate attorney and fellow investor. Asset protection is my bread and butter, and I do endorse the plan that @Costin I. so helpfully outlined below. If you want a high level of asset protection, there's very little that rivals the Anonymous Land Trust paired with the Series LLC.
The most effective asset protection plans accomplish two goals: securing your anonymity and separating your assets. The Land Trust piece of the plan works by keeping your name off of public documents. You then use a corporate structure to hold your rental properties for you. The most successful investors rarely own their properties, they simply control them with corporate and legal structures. You can learn a little bit more about how asset protection can help you keep your pants up from my previous Bigger Pockets article on avoiding litigation nightmares. Fair warning though: this is an article about lawsuits. It's a gory business. You will learn the worst-case scenario, but also the good news that you don't HAVE to lose sleep worrying about lawsuits.
By seeking a competent attorney to assist with your asset protection strategy, you're definitely on the right