Am I doing the right thing?

[Melody Chang]

hi everyone. i am new and have two questions.

#1

currently have 3 rental properties in houston and plan on buying a 4th in the next month or two. i found this seller during a garage sale and talked him into selling the house. they have already started moving and cleaning stuff out too =)

All my properties are currently under my name (ive heard this is not a good thing to do) and friends/coworkers have suggested me to start up an LLC and put all the rental properties under that entity. am i doing the right thing? or should I just leave everything the way it is?

If I do form an LLC,

is there any advantage to using the name of the LLC as the registered agent (option A) versus using my legal name (option b)? see attachment below.

thanks everyone for their help! god bless america!

[Jean Bolger]

Hello fellow violinist! There are advantages and disadvantages to having properties in an LLC. I'd suggest you do a lot more research before you jump on this advice from your friends.

The idea that most people have is that they can put their properties in an LLC and then if there is a lawsuit of some type then their personal assets will be automatically protected. I think this is really only marginally true. It might possible protect you from a spurious lawsuit, but if you are liable in an incident (it can happen, even to people who are careful and have the best intentions...) then any competent lawyer will probably be able to get past the LLC to your personal assets. And if you are at all sloppy about the mechanics of the LLC- separate accounts from your personal, record keeping, etc, then you really have no protection at all.

Another reason for an LLC is to create anonymity as to who actually owns the property. If you have someone (like your lawyer) as your registered agent then it becomes harder for someone to find you. Some folks are really into not having their tenants know who they are. This really only works if you have all your properties under professional management, obviously!

One of the problems is that banks often won't lend to an LLC, and if they do it will be a more expensive commercial loan. If you transfer title to your LLC on a property that has a mortgage then you run the risk of activating the bank's "due on sale" clause. This probably won't happen, but it's worth knowing about.

Your best protection, in my opinion (I am NOT a lawyer- so that's a big disclaimer right there), would be to have an umbrella liability policy that covers you at least up to the extent of your net worth.

I'd suggest finding a lawyer in your area who specializes in real estate and have a consultation with them. It will be worth the expense to know you are on solid ground as you build your portfolio.