How should I structure my 1st rental to protect myself?

Question

My goal is to protect my personal assets from lawsuits on my rental property

Is it possible to, after closing, once the deeds has been transferred to our names, is it possible to transfer the deed to an LLC while keeping the mortgage under our names?

Can the liability insurance coverage alone protect us from lawsuits? Do you recommend getting an umbrella policy?

Starting as an LLC right from the start doesn't seem possible because of the cost involved. What would you recommend?

As an outside the box thought, if I was married, would separating our assets protect them. Perhaps have the personal home be under her name, and the rentals under mine? If a tenant were to file a lawsuit on the rental, would that protect our home?  just a thought.

Cal Dunagan · Answer

@John Fider

This is a complex question, but there are definitely a ton of articles here on BP that I think will steer you in the right direction. Keep in mind, the articles I found are from a prominent legal expert who posts regularly here on BP, so he's going to have the best advice regarding asset protection, in my opinion. Let's break it down for each question:

1. Asset protection is the most important thing to consider when starting out. This article goes over how one real estate investor used asset protection to avoid a lawsuit. There are also a number of ideas in this article relevant to asset protection decisions.

2. Insurance is extremely important, but don't let it be your only asset protection. Here's a rundown of the difference between insurance and asset protection.

3. Not sure where you heard that LLCs are cost-prohibitive. In my experience, this is not necessarily the case. Here's a pretty good guide on how the LLC can be utilized to help you with your real estate investments. Also, if you want to know the different LLC options and how it affects your tax burden, read this. When you're done with that and you still can't decide which LLC option is best for you, this article discusses the differences between a Traditional LLC and a Series LLC.

If you have any other questions, I will do my best to point you in the right direction.

Best of luck!