Pros and Cons of a LLC vs umbrella insurance for rental property

[Monica Chan]

Hi everyone, I’m a newbie to Bigger Pockets and am excited to learn from and to know this community of knowledgeable RE investors! So I’m just dipping my toe in real estate investing and am about to make an offer on my first multi-family in Jersey City. The fundamentals of the place look good, and I plan to rent both units out (I live in my own apartment). I would like to set up an LLC to purchase this property but was told by my NJ lender that the loan would be considered a commercial loan, 30-year conventional isn’t an option, and the interest rate would be much higher. He recommended that I buy an umbrella policy instead. What are your thoughts on the pros and cons of buying with a LLC vs. buying individually with an umbrella policy? Any advice or tips appreciated, thanks y’all!

[Colleen Goldstein]

This has been posted a lot and would recommend looking back at other discussions on the topic. Love Umbrella policies and LLCs are useless for liability protection (unless you are abiding by all business rules). Check out "piercing the corporate veil" and you will quickly see why the Umbrella policy is preferred for small to medium size landlords.