Skip to content
×
Pro Members Get
Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
ANNUAL Save 16%
$32.50 /mo
$390 billed annualy
MONTHLY
$39 /mo
billed monthly
7 day free trial. Cancel anytime
General Landlording & Rental Properties
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated over 12 years ago on . Most recent reply

User Stats

20
Posts
10
Votes
Ben D.
  • Fort Worth, TX
10
Votes |
20
Posts

Liability Protection - LLC? Umbrella Policy?

Ben D.
  • Fort Worth, TX
Posted

Hello BP forum -

I'd love to hear how other landlords approach asset protection as it relates to your rental properties. Is it recommended to place ownership of all rental property into a Series LLC? Or is an umbrella liability policy sufficient?

I currently have three rental properties that will all be free and clear in the very near future. I intend to acquire another 9-10 properties over the next five years and all will be owned free and clear. Currently all properties are under my name. From doing some reading on this forum and elsewhere, the consensus seems to be that this is a risky proposition. I've had an LLC in the past for a business that we owned for a short time and I wasn't crazy about the paperwork hassle involved in an LLC. Maybe it's just a necessary evil though. We currently use all proceeds from rentals to pay off the little remaining debt on one of the properties. From there all proceeds will go toward acquiring the next property. I wonder what complexities will be involved in doing this if I form an LLC.

Any and all thoughts and advice would be greatly appreciated. Thanks in advance!

Most Popular Reply

User Stats

690
Posts
345
Votes
Ed O.
  • Investor
  • Statewide, MO
345
Votes |
690
Posts
Ed O.
  • Investor
  • Statewide, MO
Replied

Ben D.
Liability protection comes down to a person's comfort level too. I talked to a local RE attorney that is an investor, and he flat out told me he leans solely on his umbrella policy for protection.
I prefer a properly operated LLC (again, opinions differ) along with a solid umbrella policy. The challenge with leaning only on the umbrella policy or liability policies are that the insurance companies, if you can believe it (ha ha) have plenty of loopholes in policies to give them an out.
I do know an ambulance chaser that told me generally, they look for the policy limits and no more when they land a client.
Jon K. Generally, (NOT an accountant) when selling a home that is not owner occupied for 2 of the last 5 years (doesn't have to be continuous) you will be subject to taxes on the sale. Whether it's in an LLC or not, as far as I know, wouldn't change whether or not you'd be taxed.
As it pertains to RE taxes, they shouldn't go up based solely on who owns it, a person or an LLC. Does it happen? I'd bet it all that it does. Landlords are treated adversely in many communities, only for the fact, that they are landlords. I have experienced it too many times.
On the transfer, at least in my area, you simply pay a recording fee and doc prep fee (if you need someone to prep the docs for you). I'd guess the cheapest way might be to have a title company do it.

  • Ed O.
  • Loading replies...