Liability Question

[Rick C.]

Hello, I am trying to determine the feasibility of putting my existing and future properties in an LLC. All of my loans are and will be conventional, and I have no desire to go to commercial route due to higher costs, less favorable terms, etc. The banks I have spoken with will not lend conventional loans to an LLC. They also do not support or encourage me to move the properties from my personal name to an LLC after closing. Although many people do that, the banks' claim is that they do it with the risk of having the lender find out and their loan recalled. To give myself some protection, I have a $2mm umbrella insurance, in addition to the standard homeowners liability insurance on each property. Given this information, what would you do in this situation to properly protect yourself? Thanks in advance for any advice. Rick

[Tim Norris]

Hi Rick,

My opinion at least is it is really not an issue of "either/or" as an umbrella and an LLC are/could be created for different reasons. Think of the LLC and other work you may do with legal and financial advisers (such as attorneys and accountants) as your "castle walls and moat" around your assets, personal and otherwise. Think of the insurance you secure as an "archer in the watchtower". In other words, the walls and moat should be your foundation as it pertains to protecting you/your assets. The archer (insurance) won't pick off every bad guy that tries to get in, so having the walls and moat is vital. Think of them working together not in lieu of each other. Hopefully this helps!