LLC vs Umbrella Policy

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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
4y

@Nathan Kawalerski

Umbrella does not impact your loan terms. If you are buying single family rentals to start a good PM and umbrella policy should suffice.

Have yet to see a situation on a single family rental where someone was sued and the LLC protected them and an umbrella would not have.

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    4y

    @Nathan Kawalerski

    Umbrella does not impact your loan terms. If you are buying single family rentals to start a good PM and umbrella policy should suffice.

    Have yet to see a situation on a single family rental where someone was sued and the LLC protected them and an umbrella would not have.

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  • Daniel PaloscioBusiness Member
    Lender · Tampa, FL · Member since 2013 · 228 posts · 95 votes
    4y

    @Nathan Kawalerski you do not have choose between one or the other. Each provide their own set of benefits. Most of my properties are in LLC's and I have a blanket liability policy on all of them. I do have a few rentals that were Fannie/Freddie loans which are in my personal name but I will eventually put them in different entities.

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  • Peter MckernanBusiness Member
    Residential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
    4y
    Quote from @Nathan Kawalerski:

    Trying to weigh the costs and benefits of LLC vs an umbrella policy for a long term rental? I have read an LLC can hurt your loan terms is the same true for umbrella policy. Wondering which one is safest and most cost effective. Thanks !


    I have not heard that about hurting the loan terms, think you maybe talking about the lender calling the note to be paid in full if it is changed into the LLC from your name. This is very, very rare and does not typically happen. I have both LLC and umbrella policy, talked to an attorney back when I got started and he gave me the advice of being more protected is always better.

    My LLC costs $800.00 a year and the umbrella is about $400.00 a year, it's kinda like the insurance on your house or car. You are annoyed you have to pay it; however, that 1/100 chance you have to use it you are glad you did have it due to th costs.

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  • Nathan Kawalerski
    OP
    New to Real Estate · Buffalo · Member since 2022 · 21 posts · 12 votes
    4y
    Quote from @Chris Seveney:

    @Nathan Kawalerski

    Umbrella does not impact your loan terms. If you are buying single family rentals to start a good PM and umbrella policy should suffice.

    Have yet to see a situation on a single family rental where someone was sued and the LLC protected them and an umbrella would not have.


     Great thank you. We will be purchasing a duplex or fourplex does that make a difference ?

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    4y
    Quote from @Nathan Kawalerski:
    Quote from @Chris Seveney:

    @Nathan Kawalerski

    Umbrella does not impact your loan terms. If you are buying single family rentals to start a good PM and umbrella policy should suffice.

    Have yet to see a situation on a single family rental where someone was sued and the LLC protected them and an umbrella would not have.


     Great thank you. We will be purchasing a duplex or fourplex does that make a difference ?


     No. Once you get into commercial (5+ units), then yes it does.

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  • Nathan Kawalerski
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    New to Real Estate · Buffalo · Member since 2022 · 21 posts · 12 votes
    4y

    Great thank you for the feedback.

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  • Nathan GesnerBusiness Member
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    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    4y

    I'm on my cellphone so I can't send you my full LLC guide. The short version is that an LLC is good for anonymity or legal protection, both of which are not usually necessary.

    creating an LLC will cost you money to set up and to maintain. You will have to file a separate tax return which cost more. There are more administrative costs. So owning the property under your personal name is probably simpler and cheaper.


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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    4y
    Quote from @Nathan Kawalerski:

    Trying to weigh the costs and benefits of LLC vs an umbrella policy for a long term rental? I have read an LLC can hurt your loan terms is the same true for umbrella policy. Wondering which one is safest and most cost effective. Thanks !

     Lookup @Nathan Gesner LLC guide on some of his posts. Very valuable piece of info to have.

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  • Nathan GesnerBusiness Member
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    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    4y

    Thanks for the mention, Chris! I would share it here but I am on my cell phone. 


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