Does An LLC Protect Your Rental Properties Equity?

[Arjan Amiri]

Dear Forum,

My understanding is that an LLC protects your personal assets from being sued by a renter. But what about the equity in the rental property that is under the LLC? Can the renter go after ownership of the actual rental property in the state of California? Any input is appreciated.

Best Regards,

Arjan G. Amiri

[Peter Mckernan]

Hello @Arjan Amiri

Owning properties in an LLC protects a person from getting sued for all their real estate holdings, or all their assets. One tip is to keep only a few properties within an LLC and then form another one to place a few other properties within. This will prevent a person from being able to sue someone for their whole net worth. A person would be able to sue one entity, and that's why it's better to spread rentals across different LLCs.

In regards to someone trying to sue for all the equity in a home you can look at the Homestead Exemptions in the state you are looking to purchase property. For example, this exemption is placed for homeowners to keep their homes by keeping a certain amount of equity, which is state dependent. California only allows up to $75,000 in one single property to go untouched from anyone else coming in and trying to take that money through a judgement. Other states are different, for example Texas has an unlimited amount. These are only owner occupied properties. Link below shows all 50 states.

http://www.lawchek.net/resources/forms/que/homeste...