All Forum Posts by: Amanda Breck

Welcome!

Many of my clients wish they knew about asset protection strategies when first starting out. Real estate investing comes with a lot of inherent risk. Mitigating and planning for that risk is important, both to protect yourself and your personal assets, and to protect your business assets. An asset protection plan is all about planning ahead. Once a liability event occurs, it is often too late to do anything to mitigate it.

Have good insurance from the start, and consider setting up an LLC structure to protect yourself from investment liability, and to isolate liability so your whole portfolio is not affected by one event. These strategies only work if they are set up ahead of time.

Holding your real estate in an LLC is something you should definitely consider. With a small or just starting out portfolio, separating properties into separate LLCs to isolate the risk from each property is a solid strategy.

Good luck with your investing!

Many of my clients wish they knew about asset protection strategies when first starting out. Real estate investing, including short term rentals, come with a lot of inherent risk. Mitigating and planning for that risk is important, both to protect yourself and your personal assets, and to protect your business assets. An asset protection plan is all about planning ahead. Once a liability event occurs, it is often too late to do anything to mitigate it.

Have good insurance from the start, and consider setting up an LLC structure to protect yourself from investment liability, and to isolate liability so your whole portfolio is not affected by one event. These strategies only work if they are set up ahead of time.

While you are typically entitled to a judgement for past rent and other fees owed when you go through an eviction or through small claims court, collecting on the judgement is a whole different matter. Really the best you can do is what others have said here and send them to collections. For one reason or another, the tenants don't or won't have the money for you and have made it this far without paying. Having a judgement and sending them to collections does warn other landlords about the issue. That could be a negotiation point as well--we can settle this outside of court and collections so you don't have a public record to make it more difficult to rent in the future. 

With an investment property, it is a good idea that you consider the risk you are taking on and how to manage and mitigate it with an asset protection plan. Real estate investing is an inherently risky area to navigate in terms of liability, and you want to make sure that risk is mitigated wherever possible. If you want to grow and keep what you build in your portfolio, these considerations are essential. Placing the property into an LLC is typically what I would recommend.

With a small portfolio when you can handle less risk of loss, separating each property owned into an LLC to limit your personal liability and isolate one property from another is a good way to go. That way if a lawsuit due to some kind of accident on a property happens, any judgement is limited just to that LLC and that property rather than putting your personal assets and other properties at risk.

Having some kind of asset protection plan in place as you start will help you keep and grow your investments.

Best of luck to you!

Welcome!

When you are ready to jump in to buying a property, I always recommend that you consider the risk you are taking on and how to manage and mitigate it with an asset protection plan. Real estate investing is an inherently risky area to navigate in terms of liability, and you want to make sure that risk is mitigated wherever possible. If you want to grow and keep what you build in your portfolio, these considerations are essential.

With a small portfolio when you can handle less risk of loss, separating each property owned into an LLC to limit your personal liability and isolate one property from another is a good way to go. That way if a lawsuit due to some kind of accident on a property happens, any judgement is limited just to that LLC and that property rather than putting your personal assets and other properties at risk. 

Having some kind of asset protection plan in place as you start will help you keep and grow your investments.

Best of luck to you!

Hello! Setting up an LLC is a great way to protect yourself from liability and implement asset protection and tax strategies.

While you can find inexpensive DIY options out there, I highly recommend working with a competent attorney to help you set up your LLCs. I have reviewed several templates from companies, like LegalZoom, and have found that they often lack the necessary detail and thoroughness required for effective business management. Important sections are frequently omitted, which can create challenges in day-to-day operations and long-term planning. Setting up your LLC right the first time goes a long way in protecting you and your assets, and keeping the corporate veil in tact.

How you set up your LLC, what taxation you choose, and how you pay yourself all depend on the type of business you do and the type of income you generate. If you are setting up an LLC to hold a long term-rental property, for example, disregarded is typically the way to go (taxes are reported on your personal return, you don't have to worry about self-employment tax because the income is passive). If you are doing more active business, like short-term rentals, flips, property management, etc., you might consider a corporate tax structure instead.

If these are otherwise good solid tenants that take care of the property and pay on time, that is something of high value that you may want to prioritize keeping over raising rents too quickly or too much and driving them out. 

You should also be aware of what your state rules for rent increases are. Most states give landlords quite a lot of flexibility, and especially if your lease allows rent increases during the term, you are in a good spot. It is pretty common that proper notice is required to raise rent even within a lease agreement that allows it. 30 days notice is pretty standard, but that can vary by state. 

Welcome to Bigger Pockets and to Real Estate Investing! 

For investors just starting out, I always recommend that you consider the risk you are taking on and how to manage and mitigate it with an asset protection plan. Real estate investing is an inherently risky area to navigate in terms of liability, and you want to make sure that risk is mitigated wherever possible. If you want to grow and keep what you build in your portfolio, these considerations are essential.

With a small portfolio when you can handle less risk of loss, separating each property owned into an LLC to limit your personal liability and isolate one property from another is a good way to go. That way if a lawsuit due to some kind of accident on a property happens, any judgement is limited just to that LLC and that property rather than putting your personal assets and other properties at risk. As your portfolio and your risk tolerance grow, grouping properties in LLCs becomes more reasonable.

If you have an LLC structure set up ahead of time and you are making cash purchases, you have the added benefit of being able to close in an LLC and potentially have some anonymity of ownership. Certain states like Wyoming do not publish member info when an LLC is formed, so there is no public link to you as the owner. This can help dissuade lawsuits from starting.

Best of luck to you!

REITs are probably not what you're looking for here. Real estate investment trusts are for large-scale real estate with many investors. 

The structure I typically recommend is one Wyoming LLC to act as a holding company. This provides you with anonymity in the ownership of the other LLCs and real estate as Wyoming does not publish membership information. This WY Holding LLC then would typically own other LLCs located where the properties are, which in turn own the properties. Separating out properties like this, especially with a smaller portfolio, helps mitigate the risk you take on. For example, with the structure if a liability even occurred with one property, it could not effect another property in a separate LLC or your personal assets.

 Any changes you make with the secretary of state will remain in the public record, so that is something to be aware of. The lender might also not like you changing the structure back, so I would run that by them. As long as you are aware of the public records issue and so long as you run it by the lender, that could be a viable option.