When should I establish a Legal Entity?

[Michael LeBlanc]

I'm about to house hack my first duplex and I was wondering when is the best time to get an LLC and why?

[Jon Schwartz]

@Michael LeBlanc, it's 100% unnecessary to open an LLC on a house hack.

If you want protection, ask your home insurance provider about an umbrella policy. This is an insurance policy that sits behind your home insurance policy and cover to a much higher limit. But since it doesn't go into effect until the home insurance policy is used, it's very inexpensive.

I house hacked a duplex in Los Angeles. I bought regular home insurance, just like for a regular house, then a $2M umbrella insurance policy on top of that for just $500/year. That way, if something ridiculous happened -- like a neighbor's dog attacked a stranger on my duplex's front yard and the stranger decided to sue me -- I was insured up to my entire net worth.

In my opinion, insurance provides better protection than an LLC.