Self Manage- no liability protection under LLC?

[Ken Nyczaj]

From what I've read on prior posts it seems many have the opinion of by self-managing your rental properties, you will not gain any liability protection by owning the asset and performing the property management under an LLC. For example say in the case of "we" the self-managers forgot to de-ice and the tenant slips and falls, we are now liable because we self-manage therefore nullifying the corporate veil.

I'll be partnering with a local friend/ contractor in Maryland, and we plan on doing all the rehab plus self managing at least for the first few properties. We want the LLC for protection for our personal assets (primary residence, investments, cash)

He is a licensed/ bonded/ insured contractor. I'm thinking we could set up a series LLC and have one manage the properties while the other LLC's hold the real estate.

We are meeting with a Real-Estate Attorney this Friday and I'd like to be prepared as possible.

I'd like to hear if anyone else has opinions on this. Thank you.

[Scott L.]

Originally posted by @Ken Nyczaj:

@Jeffrey Holst That's why I was thinking to have a separate LLC for all management operations so we aren't negligent personally. And, then hold all the other real property in separate LLC's.

@Will G. That's a good point to bring up, that the owners of the LLC are still on the hook for the loan even if the LLC's property is lost in a court case. But, that specific loan is all they are on the hook for, and personal assets haven't been targeted. Our real estate lawyer will be defending any suit against our operational LLC that is strictly doing self-managing of properties. In my opinion that is most likely the LLC that could be sued since it is actively managing. While the actual property is just held in another LLC.

@Tone Church That's a fantastic idea to have tenants responsible for snow removal and salting and have it written in the lease with the tenants initials next to it. You could have an addendum that tenant assumes responsibility for routine maintenance that would cover additional items like landscaping, smoke detectors, air filters etc. Renters Insurance is a must as well

@Ryan C. Like you said, finding good tenants and take care of your properties is a priority.

@Scott L. "Even if you self manage, there is significant liability that attaches to the OWNERSHIP, not the management of the property." Could you elaborate on this? We are thinking to have a separate LLC to do all the managing if necessary. I've heard Texas is a Land-Lord friendly state while Maryland may give the upper-hand to Tenants.

I think having an LLC for managing personally owned property may not provide as much liability protection, in that defects in the property condition or management are still the responsibility of the owner. And the lease will be between the individual owner and the lessee. Even if the LLC is the property manager, the the owner is still liable for the actions of his agents (the LLC). I manage two of my SFRs this way anyway, because the financing terms were not attractive for an LLC. I am under no illusions that I will not be sued personally for these self managed properties despite my prop management LLC. On the other hand, I am buying another property with different financing that I will place in a separate Series of my Texas Series LLC, and then the property management will be done by my management Series of the LLC. For people not familiar with Series LLC, the strategy is akin to using separate LLCs for management and ownership. Just a little cheaper and easier in states that recognize Series LLCs.