New Investor- Best Asset Protection Strategy?

[Andy Crawford]

I'm closing on my first SF Rental Property in the Cincinnati area. I've filed for my first LLC and plan to quit claim deed into this entity after the loan closes.

I’m planning on buying at least 3 properties by year end and more ongoing in the future if possible.

I don't understand the best asset protection strategy. Some say sufficient Umbrella Policy and group a few properties under same LLC. Others say Individual Llc's for each rental.

Tax time would be cumbersome and expensive filling multiple returns.

Any suggestions for a newbie?

[Kris Wong]

First and foremost, you need a warranty deed, not a quitclaim deed. You can check with a title attorney, but a quitclaim deed will likely void your title insurance. Second, with regard to tax returns, LLCs can be taxed as disregarded entities, so you don't necessarily need one return per entity. These are questions an attorney can answer easily, and I am guessing by your question that you are not working with an attorney. If you are not working with an attorney, then you probably don't have a reasonable company agreement, and aren't privy to the formalities involved with keeping your entity "valid". In this case, a competent prosecuting attorney could easily make an argument that your entity is not a valid business, and could likely "pierce the veil" of your entity, as it's called.

Lastly, if you put multiple assets into one entity, then a lawsuit arising from any one property puts them all at risk. You should understand how your liability insurance for each property would cover you in the case of a frivolous (or otherwise) lawsuit. For instance, a personal umbrella policy would not cover your business, or assets owned by your business (unless written to cover these).