All Forum Posts by: Jenny Tools

I appreciate your response. I have a few professionals that I have been trying to reach out to in each of the areas you mentioned but am awaiting their return calls. As far as a "partnership," there really isn't one on paper. We wanted to keep this simple. I would buy a piece of property for a future home and then hire the builder as if we didn't even know each other. He would charge me a price to build on the lot (at a discounted rate) as he would any other customer. We would agree on a contract and then I would go to the bank and apply for a construction/perm loan and then promptly have them start the build. In the end, my loan would convert and then I would put the property on the open market with a realtor. The builder goes their own way as they would at the conclusion of any project. The realtor agrees to discount their fees in order for me to exclusively use them in the future. Rinse and repeat.

What I am really concerned with, is how do I protect my property from non-construction related liability, like a trespasser or a nosy neighbor? I am sure I could obtain general liability insurance for the property but I want to protect all my assets outside of this side venture. I also don't want to shell out around 1k per lot to have an LLC when i would need to obtain insurance for the LLC to protect me from liability as well.

I guess an easier question is, how does the average Joe protect themselves from liability on their own lot during a commissioned construction project?

Thanks!

Good evening everyone!

I am starting out a partnership with a local builder to build speculatively on lots that I purchase outright. The builder is giving me a discount on the price of the build and I am in turn agreeing to use them solely for these builds, where they will make money in volume. I plan to do 1-2 a year if I can find land that makes financial sense to both of us. My builder carries builders risk and liability. My insurance company has told me that, while they would insure a project like this from a liability standpoint, eventually they would see me doing this frequently and see it as a business and would direct me to commercial liability insurance. I really would like to know what options I have to cover me liability wise on the lot that I own, during construction, and after construction while the house is on the market.

Would it be worth creating a separate LLC for each of these properties and then obtain liability insurance for the LLC? Would that cover a trespasser who was injured? Would some sort of commercial general liability insurance be better suited for this endeavor?

Additionally, if I were to create an LLC, would I be able to avoid self employment taxes? This will solely be a side venture and I will maintain a well paying day job where I expect to pay off SS before the end of each year. I ultimately want the profits of all the builds to be taxed as ordinary income additional to my W2. I do not plan on holding and do plan on selling ASAP.

I appreciate any help and insight into these questions and look forward to reading different perspectives!