LLC my first property??

[Yasmin Mohamed]

Just finish listening to Episode 196 with Brandon Hall who is a licensed CPA. He mentioned that forming an LLC is important. What are the benefits of forming an LLC for rental properties?

[Robert L.]

For the first property, you've got enough to worry about and I've seen that having LLC's and stuff get in the way of taking action. A good insurance policy and even an additional umbrella policy will get you the protection you need. You can even put the property into a TRUST if possible so that it can at least not have your name direct, but if you're getting a loan, banks may not like it deeded into a TRUST. An LLC will have like a $160 yearly fee but it will help protect you from a lawsuit getting to your personal assets if it ever surpasses the insurance claims. If the property is fully leveraged in a loan, there's not much to be had so the lawyer who is suing will not really be motivated.

The structure my lawyer advised me is to have each of my houses in its OWN LLC. Let the managing partner be ANOTHER LLC. Have insurance for each house. Then, have each property fully leveraged in a loan so the equity can be used in buying even more houses (bonus) and this is really strong protection.