@Seth Mosley , I agree with @Bill Gulley who are both experienced guys and didn't keep what they built simply because of entity structures. I'm in the same camp. It's funny, the question of "to entity or not to entity" is one of the most asked questions on BP and the pro-entity crowd is typically dominated by folks that have bought between 0 and 10 properties in their investing career. The experienced investors are usually the ones saying that entities are most likely unnecessary. Coincidence??
I've made my opinion known many times but I'm happy to chime in again. Let me begin by saying that I have entities. I don't have entities for asset protection, however. I have them for legitimate business purposes--to segregate groups of investors, varying ownership percentages between myself and my partners, and for branding.
I know that Bill and Jay have been lucky (good?) enough to have not been sued so if you have followed this thread this long you might believe that the "you will get sued" statement is untrue. I'll present the other side of that story. I believe that if you do enough of this for long enough it's most likely a matter of time. You will get sued. SO WHAT?!?! It's a reality of business.
I've been in this business for 25 years. Bought over 700 properties. Owned over a thousand doors and currently around 500 or so (not counting interior doors, LOL). So my exposure is high. My personally-owned rentals are just that--owned personally, as in my own name. Remember that my entity owned properties are for a business purpose? That's why. Not saying that what's right for me is right for you, nor am I saying that it's right for me (I could be wrong) but it's worked out fine. I have lots of insurance.
I've been sued several times. I can think of seven times off the top of my head. There may be more but I don't remember for sure. Why not? Because they obviously didn't make a big enough impression on me to even matter.
Let's talk about those suits. Two were in small claims court by tenant plaintiffs. Both tenants lost. Cost of defense: some wasted time showing up to court. Another one of the suits was a guy I sold a flip to who claimed that my contractor didn't do something correctly. It was true, but the homeowner wouldn't allow the contractor back in to fix it--he wanted to shake us down for $5K in small claims court. We offered him $1,500 in lieu of the contractor making the repair but he wouldn't take the money. In court the judge ruled in his favor and awarded him $1,500--so we lost but won.
Three suits were cases where I bought a house on the courthouse steps at a foreclosure auction and the foreclosed-out homeowner sued their lender for botching the foreclosure and me for quiet title, misrepresentation (for evicting them when I didn't own the home that I paid for), and fraud (for what? Signing over a cashier's check?). I won all three cases. One cost $30K to defend (settled with the lender rather early-they refunded my money, I gave them the house, and they paid me a bit for my trouble), one cost $20-30K (don't remember exactly but it got thrown out of court before trial) and the third cost over $170K and counting (this one went to trial, I won but now the idiot is taking it to the Court of Appeals so I'll be continuing to pay for who knows how long). In addition to those defense costs I'm out over $100K in holding costs for houses I couldn't sell during the litigation (the third one going on 4-1/2 years).
The final case is one where I bought a house on the courthouse steps and evicted the occupant. She refused to move her stuff out of the house even after the statutory time in which she was allowed to retrieve it. I was entitled to dispose of it but I couldn't morally do it--her whole life was in this almost 3,000 SQFT house. So, I hired a moving company to move everything to storage units. When she reimbursed me for the moving cost I gave her the keys to the storage units. Three hours after giving her the keys to seven storage lockers I get a call from the police--she claimed we stole a pocket watch and all of this other stuff. How could she know that out of all of that stuff there is a missing pocket watch in only three hours when it took a crew of six guys three days to load it is beyond me. She filed suit for theft of over $1.2 million worth of property! She produced a list of hundreds of items that we alledgedly "stole", and our private investigator found most of the items in the storage units during discovery (the rest of the items didn't exist)--the whole suit is BS but this woman is a serial plaintiff and hired a lawyer who has a a pending license suspension to represent her (birds of a feather...). This one is going to jury trial.
Now for the meat of my point: All of the properties associated with these suits except one of the tenant claims were owned in an entity. Will someone from the pro-entity crowd please explain to me how having an entity (actually multiple entities) helped me???!!! Or prevented this??
The practical risk, in my opinion, is not judgments, it's the cost of defense and having an entity does not eliminate the cost of defending yourself from frivolous lawsuits! If you want to be in this business, you have to live with the fact that you are a target.