Insurance For Three Owners

[Lisa Foreman]

I just bought a SFR in Texas with two partners. We paid cash so we are working out the property insurance after the sale. Two of us are investing from trusts holding our SD-IRAs. One partner is investing in his own name. We did not form an LLC - at least not yet. The partner investing outside his IRA got the policy in his name and added us as 'also insured'. However, the contract states that he is the only one covered by 500k of liability insurance. We decided to go ahead and accept the policy so we can get a renter in there as soon as possible. We can shop different insurance later. Is this normal? I thought an LLC would have limited value when buying property from a trust but I didn't foresee this wrinkle. I don't want to go overboard making legal entities but if I need one for this investment then I anticipate needing four separate LLCs because I'm investing or planning to invest with different combinations of partners. I'm so early in the process that I don't want my cash flow to be lost to legal and filing fees if it's not necessary.