Hi, I recently just learned about umbrella insurance. I was wondering, if I am about to start my house hacking journey, should I have an umbrella insurance or LLC or both? Or should I not have anything at all? I want to sign up for an LLC but some people have said lenders don't really like giving loans out to LLCs? So I am really conflicted on what to do.

@Jimmy Lieu First of all, if you are house hacking you shouldn’t be buying under a LLC. Since it’s your residence it needs be under your name. Overall, it’s pretty ill advised to hold your own residence in an entity. Even if you have a LLC, you are going to need insurance... the LLC doesn’t preclude it. The LLC makes getting financing troublesome because you have to get commercial loans. Sometimes you have to have one property per LLC because of lender requirements. So, the costs just propagate

@Jimmy Lieu that is largely correct, lending to an LLC opens up a new category of risks for the lender. I started with an LLC for protection but acquired umbrella insurance down the road as well (mostly because my attorney advised it).

Jimmy, I agree with @Dan Weber - keep it simple. The odds of you getting sued or having an issue with one house-hack are pretty small. I didn't have the proper structures until I had over 10 properties. There are many investors that get caught up in all the details and end up spending all their money they make from their one or two property portfolio. If you have the proper insurance and do business the right way, you'll avoid over 90% of issues.

What should I use? Umbrella insurance or LLC?What should I use? Umbrella insurance or LLC?

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Dan Weber

Realtor
Portland, ME

Dan Weber

Realtor
Portland, ME

Replied July 30, 2020 13:28

Keep it clean and simple. If you are house hacking, get your owner-occupied financing (more favorable financing terms than an LLC can get), get a normal home insurance policy and an umbrella insurance policy.

Dan Weber

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