Why do you need a LCC if your networth is in real estate?

6 Replies

I Talked to very many people, investors, lawyers and other fellow landlords.

Some say a LLC is a must and other says its a complete waste of money and a umbrella policy for 1 or 2 million is the way to go including a few attorneys.

If your a real estate investor most of your networth is in all your properties right? For me 80-90% of my networth is in all my rental properties so why do I need a LLC if they can only sue the LLC which is basically everything I own anyway.

Any thoughts or advice is greatly appreciated.

More layers to thwart an actual suit, much of a suit is smoke and mirrors as well in addition to the actual protection if the suit goes all the way to conclusion. A lot of the suits are settled or mediated anyway.

LLC provides not just protection but it provides camouflage as well.

The question is is it worth a few hundred dollars to protect the other 10-20%, such as your personal residence and to protect against any judgments. Also over time, do you think you will diversify your assets beyond RE holdings?

Lets assume you have the following:

A: A house

B: A checking account

C: Rental A

D: Rental B

Without LLC's: Imagine someone trips on rental B because a handyman left (anything) outside, they sue. Umbrella policy decides you arent covered because the moon is only half full and its a wednesday.

What can the attorney go after? A B C or D? If you said E for Everything you are right. 

Each property gets its own LLC.

Lets say you commit homicide, and the family sues you. You own shares in all these LLC. Yes they will probably go after all of it.

Notice: Not legal advice, not an attorney. For Education and entertainment discussion only blah blah. Always Vote Libertarian. 

LCC? Oh. LLC. Not really wanting to kick this dead horse again, but I have LLCs that hold title to my commercial properties / multi's over 5 units. I put the same asset type and business purpose up to $1M in each. I may raise that to over $2M some day, but for now I enjoy not having to complete the Sch M on my LLC tax returns.

The advantage, I think (I am not an attorney) from an asset protection standpoint is you can classify and separate your assets into different baskets. If one gets sued, your others and your personal assets should be protected. I do not put residential property into LLC(s).

I also do it for the anonymity, which to me, is huge. No quitclaim deed title trail for me.  Hope this helps @Jimmy S. !

Originally posted by @Steve Combs :

The question is is it worth a few hundred dollars to protect the other 10-20%, such as your personal residence and to protect against any judgments. Also over time, do you think you will diversify your assets beyond RE holdings?

 How would it only cost me a few hundred? I would definitely do it for that.

I don't know the PA fees offhand, but in NC it is around $125 to file and $200 a year to keep it going. Check with your state's Secretary of State for filing fees. You can prepare the paperwork yourself or you can find companies online to prepare the documents for you for around $100.

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