Deciding what property and rental scenario is most secure.

1 Reply

Hello and thank you for taking a minute to read this!

I am a Tenant in Common "owner" and this home is placed in a Trust. However, I am also looking at buying a condo in Northern Virginia

I am trying to figure out the best rental-income scenario, but with the lowest liability. 

I could move out and rent my current home, and net about $800/month after property management fees (I would prefer that at least in the beginning) and some portion set aside for fixtures. However, I am not sure that I can put a house that is in a trust inside of an LLC, so is my only liability option here an umbrella insurance?

Alternatively, I could establish an LLC and buy and rent the condo, but...I would likely be losing $500/month because of the purchase price vs rent factor. The area I am looking in would result in a slightly higher mortgage than I could rent for...initially. I could also house hack the condo, but I'm still worried about liability and would be worried about being a landlord living with tenants. I figured I could bypass this by living in my own LLC...but I think I would miss out on valuable tax benefits, and I'm not sure an LLC would actually cover me in this scenario.

Any other options?

Apart from the awesome folks here, should I engage a real estate lawyer and a real estate CPA? And if so, any advice on what to ask outside of these scenarios?

Thank you soooooo much!

Hi @Luciana M.

I think you are overthinking and overcomplicating your situation. Yes, you can create a complex and expensive legal structure to minimize your liability (you will always have a degree of liability), but this issue is stopping you from taking action. 

I'd keep it simple. Buy in your personal name and take advantage of the current historically low-interest rates locking a 30-year mortgage, especially if you are thinking about house hacking . If liability protection is very important to you,then get a strong home insurance with enhanced liability protection and even an umbrella insurance, if that makes you feel better. 

If you end up liking investing in real estate and think about build a sizeable portfolio, then you can think about how to create a legal structure to protect your assets. But to start, I'd keep it simple. Make sure you like it first before spending a lot of money on things that are not directly tied to buy/improving a property.

Disclaimer: I am not a CPA nor attorney, if you want professional tax and/or legal advice, please consult with the right professionals (I can refer you to a few if you'd like to).