When is it time for an LLC?

[Joe Boggin]

I know a lot of people have different approaches to protection want to comes to buying homess? My CPA told me that if I were to buy more than one property it would be in my best interest to have an LLC for every property. I'm aware that is an extremely conservative approach because there is always that "what if" scenario.

I feel property owners really have to be asleep at the wheel for a substantial pay out to be awarded.  Has anybody ever heard of a landlord losing everything he owns including his primary residence where his children are raised and his family getting kicked to the street because they didn't install a banister correctly or there was a fire because of an outlet was not wired properly?!  

If you were to have rental properties in each of your tenants sign a lease are there clauses you can put in the release that waives any and all liability to the proper owner?!  I know asset protection is about layers and I'm wondering that having a lease with a worded clause offers any sort of layer of protection?!  

[Doug O.]

I hold each property in its own LLC. There are advantages and disadvantages.

Piercing the corporate veil of an LLC is relatively easy if you are slapped with a large enough lawsuit, so you can't really count on that protection.

I do like the anonymity it provides, as well as the separation of assets. The way to truly benefit from this form of ownership is if you own several rental properties, and all are owned by LLC and then managed by a third party manager. In this way you are able to deflect virtually all liability. It is not quite as simple as I am describing it, but that is the easiest way to explain.

Keep in mind, LLC may change your managing style depending on where you are located. A good example - in my location in NJ, by owning via LLC, I am unable to evict by myself - I must have an attorney represent the LLC. Obviously, this adds to the cost of each eviction since I cannot simply file at the court myself. Each municipality is different, so make sure that you wouldn't be affected by something such as this.