liability issues with rental property?

Question

I was just wondering what liability issues exist with rental properties. Should I buy them with an LLC. The other issue is I want the cash to be mine not my companies. To be able use the money from my rental to pay my personal bills and not have comingle issues, but I don't want exposure to lawsuits either is there any solution?

Ken Latchers · Answer

What they said.

In addition, a thoroughly thought out lease agreement that has been vetted by a landlord-tenant attorney.  And some of the ones I have seen for sale are lacking some major stuff.

I would take a $1 million liability insurance policy over an LLC any day.  LLCing a property makes financing a lot harder for many.

Bill Gulley · Answer

David, there are lots of threads about LLCs here and liability is discussed, but IMO, insurance is the best way to go. If you keep your properties in good shape, meet codes and use common sense your exposures will be limited. Learn the rules and laws and treat everyone the same as a tenant.

Having an LLC doesn't mean you don't draw money out, you can do that as soon as it's made! Just write yourself a check from the company to you as an individual just like anyone else you pay and mark the account as David Drawing Account.

Ned Carey · Answer

There are all kinds of liabilities when you own real estate. You are liable to the tenant for a safe property ( lead paint asbestos etc) You can be liable for what your tenants do (In MD a landlord was held responsible for the tenants dog biting a child) You are liable to others (trip and fall) Plus you also have financial liabilities (property taxes, code violations etc)

An LLC is a help but it is a last resort, not first. 
1) Obey the law
2) Treat tenants with respect
3) if something goes wrong deal with it right away
4) Be a responsible owner
5)  Have appropriate insurance
6) If all that fails then an LLC might save your butt.

Most LLCs are taxed as a partnership or a disregarded entity. This means you can put money in and take it out of the company without tax consequence. However the LLC should have it's own bank account and books.

I recommend the books by NOLO Press. They have many self help legal books including ones on LLCs. I am not suggesting necessarily that you form your own LLC.  However reading up on it will help you be better informed when you speak with an attorney

liability issues with rental property?

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