LLC or Insurance. More confusing than I thought

[Rudy Hernandez]

Hi BP members I have studying and asking questions regarding starting my LLC or getting a GL policy on my rental properties. Well, I asked my mortgage companies and they tell me if I did the LLC it would convert the loan into a commercial one, which means rate and terms change as well as expenses go up. Me no likey. Than I asked about the GL policy with my insurance company and they said it would be like a commercial type policy and expensive. Me no likey that either. I asked around and I have been told that some investors have their rental properties under the LLC but the loan is in their personal name. My question is this, in doing it that way are you still exposed to be sued and the houses now available for grabs? I feel like doing it this way the homes are not really protected. Am I missing something? I'm getting more confused the more I dig into this topic. What's in your experience and btw I am in Texas. I'm sure laws are different everywhere. Look forward to your feedback.

[Frank Chin]

I do rentals and I have yet to place a property in an LLC. I buy several million in umbrella insurance on top of landlord insurance, have tenants buy renter's insurance and use licensed contractors only.

With the LLC, for most people it would be single member or a couple, they'll sue you personally anyway under the "alter ego" theory. For real estate, they sue the LLC as the owner, and you personally as a negligent manager, unless you also have a PM and covered under the PM's liability coverage.

But most of all, land lording is a people business, and if you treat people fairly, not be mean, you save a lot of trouble as well.