Legal Issues - Any that I should be aware of as a new investor?

[Account Closed]

Hello, I currently am new to the real estate scene. I was wondering if anyone has any advice on legal issues I should look out for when owning a rental property I know one question I have in mind is more so liability. My biggest fear is a tenant getting hurt on my property (i.e. Slipping on ice, down the stairs, etc). Is there anything that I should be aware or take precautions to prevent these things from happening. I know that I can't stop everything but if i could even minimize issues that would be great! Thanks in advance for all the help !!

[David Dachtera]

@Account Closed

Here's what you need to understand about business entity structures...

To get protection from your business entity structure, your entities need to be owned by each other, NOT by any human person.

THAT is where the protection comes from - there's nothing "magic" about LLCs, S-Corps or C-Corps.

Set up a trust with you as the beneficiary. The trust becomes an owner of your S-Corp and your LLC(s). The S-corp is another part owner (member) of your LLC(s). So, you get the multi-member LLC protection. Because the beneficiary of the trust is not publicly available, your identity has good protection. You control the entire structure, but you do not own it. The entities "own" each other. "Control everything, own nothing".

Umbrella policies INVITE litigation - they do NOT discourage it. The whole purpose of a business entity structure is to discourage litigation by limiting potential ill-gotten gains should someone decide to sue instead of earning their own income honestly.

The idea of having an LLC for each property is slightly misconstrued. For SFR's, no, this generally not advisable; however, you don't want to have too much / many assets in any one LLC. Successful litigation against an LLC could result in the loss of the LLC and its holdings. So, limit your losses by limiting the holdings in any one LLC.

For example, if you had 12 high-value SFRs you might have them in six or more LLCs. If those 12 SFRs were low-value, you might only have three LLCs, depending.

Don't let the cost thing distract you. A business entity structure incurs certain costs to protect the integrity of the "corporate veils". Likewise, insurance incurs costs to emplace and maintain the policy. 

Unlike an umbrella policy, however, the entity structure discourages litigation. The umbrella policy invites it.

Remember: you don't make money by not spending it - that's a consumer ("broke-minded") paradigm. You make money by making money: invest for income and put your income to work earning more income and/or preventing losses. That's the entrepreneurial paradigm.

David J Dachtera