LLC's, Landlord Insurance, Umbrella Policies

[Trevor Lohman]

Hi Everyone!

I just read a great thread on this topic, but am still struggling.

I'm looking to purchase an out of state rental property in the 30-45k price range (pending finding a motivated seller) as an income property.

Let's start with the LLC

It seems everyone has a strong opinion on this one... it seems that people either say you absolutely must have one, or don't bother because the corporate veil will be pierced immediately and the only real protection is an umbrella policy.

What do you guys think?

Okay, speaking of insurance. It sounds like at a minimum you need landlord insurance (makes sense) and that you should also have an umbrella policy.

This all sounds good, especially doing out of state landlording.... but its starting to add up fast when we're talking about rent of 400-650 bucks. Legal zoom wants 99 for an llc plus 150 a year to manage paperwork or something (what's that about?), plus a 100 dollar state filing fee plus two huge insurance policies... Is this just part of being a responsible investor? I want to do it by the books, but also want to make sure I'm cutting costs if it makes sense to.

Thanks for the help guys, looking forward to your advice

Take care,

Trevor

[Marcia Maynard]

LLCs provide basic liability protection. You will benefit from the additional protection an umbrella policy affords. LLCs provide tax benefits too, depending on your situation. We had a top notch attorney draft ours instead of going the do-it-yourself route via the internet. The LLC defines key aspects of how we run our business. Before we put our properties in an LLC, one of our partners died unexpectedly and our properties had to go through probate. That was a lengthy and costly process. Now if one of the partners dies unexpectedly or wants out, the LLC defines what happens to the property and it won't go through probate. One thing to keep in mind, if you are getting a conventional loan, the lender may not allow the property to be in an LLC.