Updated about 3 years ago on . Most recent reply
Rental property risk averse
As a new rental property investor, I totally agree with Turner Brandan's statement in , you would be sued sooner or later. Though we can control the risk by screening the tenants carefully, we can't guarantee there are no lawsuits against us which may result in vast losses. I know that a common way to avoid this liability is to find LLCs and transfer the property to the LLC to realize "limited liability", while I'm an investor use financing, according to my knowledge most banks don't allow property title transferred to LLC, they may ask us to pay the mortgage "on-sale". So in this situation, what can we do in advance to minimize our risk during the rental property investment journey? I heard that one method is using "umbrella insurance", is this a good way or any better solution?
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- Real Estate Broker
- Cody, WY
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Track Brandon down and ask him what he means by "sued" because there's a lot of variation. The vast majority of Landlords will be sued, but it will be over a security deposit dispute or something small. Your insurance will be enough to cover it, if you even lose.
This idea that someone is going to slip on ice, sue you and take all your property is nonsense. It keeps lawyers employed, which is why they spread fear among the masses. I've been on this board since 2010 and I have tried to find an ordinary Landlord that lost their property in a lawsuit. Crickets.
If you're worried, get an umbrella policy for $200 a year and move on. the LLC costs $200 to set up, takes work, and will cost you more to renew each year and file taxes. It's just not worth it until you get bigger.
- Nathan Gesner
