I am a fairly experienced real estate owner buying and holding properties for rental income and I am actively involved in the day-to-day management. These properties are in New Jersey, Virginia, and Florida. Titles are held in individual LLCs but I am still legally required to guarantee their mortgages.
How can I structure my business to reduce exposure to lawsuits?
Because of the number of mortgages limiting my ability to continue to borrow funds, how can I structure the business so I am able to obtain financing for other purchases?.
In addition, I am also looking for a good insurance company to purchase an umbrella policy. My current provider excluded some of the rental units in my portfolio.
Thank you in advance. Any help is greatly appreciated!
Insurance is the first step.
As to more funding, look for private funds or portfolio lenders.
There are several podcasts on this idea. I believe it’s Episode 114ish with an attorney who talks about this.
I’d recommend you find that one and then give that attorney a call.
Thank you, John and Caleb.
- John, I was thinking about moving some of the rentals to an S Corp and obtaining insurance coverage thru the corporation. Not sure if that will suffice to protect me, personally. I was under the impression that I needed to establish the legal structure of the business before pursuing insurance coverage. Thank you for answering!
- Caleb, thank you for the info. I am going to look into the podcast.
At first glance here it appears you have a funding problem, not an asset protection one.
Didn't you put your little houses into LLCs for 'asset protection'? Why did your insurance co disallow some of your rentals from your umbrella policy?
S-corps are not a good vehicle to hold real property in general (double taxation), unless your s-corp is the member of an LLC.
S-corps are for actively earned income, in general.
If you are married, have your spouse buy separately if you are running into loan limits.
FEAR can be False Evidence Appearing Real. Is your fear of lawsuits reasonable?
Podcast 109 will just scare you more. You already have LLCs and certainly don't need a DST.
109 was my least favorite podcast of all. None of the instigators of the fear were hear to calm everyone after the fallout, except me and some others that don't even bother contributing anymore. My $.02...
I have a suggestion for a company to handle the Umbrella. PersonalUmbrella.com writes over rental units. Have your agent contact them or, if they do not write with them PM me and I will find out from them who write in your area.
Thank you, John! I 'll let you know.
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