All Forum Posts by: Bienes Raices

I haven't done either yet, but based on my research but I think the umbrella is a lot cheaper, if you don't have a huge amount of properties. With LLC you've got the initial cost to set up, separate biz bank account, registered agent if you choose to pay one, possible separate tax return to prepare if you use EIN or s-corp election, and your annual state fee which can go up over time, and with the current propblems states are having they try to raise revenue that way. Multiply those costs by the number of LLCs you have. Plus you still need to pay for some kind of liability insurance on top of your LLC protections.

I think the real issue with using umbrella alone is if some event is excluded in the policy.

Thanks. I've been baffled by this whole thing.
If this doesn't pan out with TAPCO, I'm going to look into going without an entity for now and getting an umbrella with a high limit. Not the perfect solution, but much less of a headache. Like many states, Florida is having financial trouble right now and nickel and diming us on things. If they decide to raise the prop. taxes or something else then I'll have the money to use for that that I would have been spending on entities.

Eddie,
I found out Foremost and AM don't do policies in Fla. I called Allstate said they wouldn't insure the LLC for liability.
I may be able to get it through TAPCO--at least the basic 300K liability. And I found another company that will do it, but they're not rated by AM Best so I'm not sure how stable they are.
All the agents I called told me that the companies wouldn't do the liability part because it was too risky, they would be on the hook not just for something that happened at the house but whatever business ventures the LLC undertakes. Maybe they're worried about multiple houses being under the LLC and increased risk. I found it strange because I've never heard of this issue before.

"Homeowner Insurance Co.", lol, how original...

New twist of events: I just found out the insurance companies around here that will insure in the name of an LLC (some won't at all) completely exclude liability for an LLC. I would have to get a separate expensive Commercial general liability policy for each LLC. And they can't really give me a real quote on the gen. liability until I have the actual property that I want to buy. But I kind of need to know how much it costs now so I can decide whether or not to even form the LLC. :roll: :roll: :roll:

On top of the costs of separate bank accounts for each LLC, the annual registered agents fees if I do that, and the annual filing fees, and possibly doing a separate tax return(s) if it's taxed as an s-corp, the costs of these entities is really starting to add up!

I'll call Foremost though--maybe the Landlord Insurance idea will work with an LLC. If that doesn't work out I'm out of ideas.

I've decided to form a single member LLC (I'm aware of the negatives in doing that). Since, as I understand, the operating agreement isn't that complicated for a SMLLC, does it make much difference if I use a (reputable) service to save some money instead of an attorney?

(The reason I ask is because my friend is a lawyer and he told me that attorneys just use those services anyway to create LLCs)

I'm a newbie, so take this for what it's worth, but the general idea is to either quit claim or warranty deed the property into your LLC, depending on your state, I believe. You current mortgage will have a 'due on sale clause' that the lender technically could call when you transfer ownership, but very rarely does in reality.

Dave,
I knew that was too good to be true.
I basically plan to do the repairs soon after the tenants ask, and document everything.
I'll call Foremost and see if I can get some more information.

I've thought about not using entities at all, but everyone says it's so dangerous to own properties in your own name. Plus I'm not sure what my insurance options are if I own them in my own name--I was told not to use personal umbrella for rental properties because it has lots of exclusions.

The idea of using no more than 3 LLCs and spreading the cost of the entities over a group of properties seemed like a good compromise to me. 1 LLC for each prop is not something I want to do. That could be a disaster if they decide to raise fees, plus it's too many bank accounts and paperwork to manage.

I will be managing the properties myself. As I understand it they have to prove that you were negligent, or that you didn't bother with a repair after they informed you about it to sue you individually.

Interestingly, both attorneys told me not to worry at all about being sued individually if I was managing the properties myself. Although that made me feel better, it also contradicts everything else I've read.

update: another insurance agent (I had left a VM with her) called back. She said they could write a General Liability for an LLC of up to 500K (per incident), 1 million agregate. Then I would have to get umbrella if I wanted to go any higher than that, but she didn't think it was necessary to do that.

Before, I didn't understand that you needed general liability first before you could get an umbrella. I thought you bought the umbrella policy on top of the 300K of liability that comes with the dwelling policy.

I understand the dwelling part, it's the liability I don't know how to set up. I could go with the 300K basic liability that's offered with the dwelling policy but I don't know that amount is too low.