[First time buyer for Rental property] Do I need to make a LLC?

[Alexander Thomas Chaney]

About to take the plunge into real estate investment. Before I buy a house and start renting, do I need to make an LLC? Or maybe make a business of a different type? If so, what are some good resources?

I'm located in Missouri if that makes a difference. 

Thanks in advance!

[Greg Scott]

A lawyer that creates LLCs will always tell you "yes".   My non-lawyer opinion is "it depends".   

 - First line of defense is you and how you operate.   If you run your property well and comply with the laws, it makes you much less likely to get sued.

 - Second line of defense is insurance.  Don't skimp.   I have a $2M umbrella policy

 - Third line of defense would be entities such as LLCs.  LLCs can be very helpful, particularly if you have lots of assets outside of the real estate investment that are unprotected.  If you have, say, $1M in cash in the bank, you become a big target.

I heard an insurance executive talk about the level of claims he sees from liability on SFRs.  Out of thousands of properties they get a handful of claims each year and he said over 30 years the largest payout he ever saw was $1M.   For me, that helped gauge the level of risk.