Am I playing with fire on my umbrella policy?

Question

I am holding my properties in my own name, no LLC etc. For protection, I have a massive landlord and umbrella insurance (1m, 2m respectively). For simplicity, I have a website with "business name" which lists all the properties, and also have a credit card in that name. The "business name" is not registered officially or incorporated in any way. Am I playing with fire in regards to the properties being part of a business and compromising my umbrella insurance coverage?

Your thoughts are much appreciated.

Jeff Bridges · Answer

Not a lawyer caveat- insurance companies want their clients to be low profile. For example if you drive an expensive exotic car, you're a target for someone looking to make an accident claim or liability claim since they see you might have deep pockets. If a tenant sees your business or googles your address, they see a company with multiple properties and deep pockets for a possible insert "BS" liability claim that occurred on your property. In your case, I don't see the benefit of having a business and all of your personally owned properties listed on a website for tenants/ attorneys to easily find and aggregate the total value of your assets. You just made their job super easy. Granted, attorneys can find all of your assets very easily with their database searches if they are looking to research your assets so I'm not saying you're hidden to begin with. You can however make it harder for tenants to get any ideas about a slip and fall claim leading to a big payout after hiring an attorney. Your fake business just leads to your very real personally owned properties and if someone has malicious intent, they will go after you and your assets personally. You want your tenants to ideally see you drive a vanilla car and think you are a small time landlord with few assets. Try googling your property addresses, your business website will likely pop up. See how easy it is for folks to connect the dots publicly. Consider changing that.

Jeff Bridges · Answer

What exactly is the purpose of your website with your tenants or anyone else for that matter? investor reputation? online application? You realize that even hand picking your tenant applicants and providing them access, they can see your entire portfolio during the application process. Cozy lets you send online application without showing your entire portfolio as does other online applications. Why cant you just send them a cozy application URL via email when they are ready to apply and it goes inactive when not advertised. While big multifamily buildings need to advertise all year long; you only need to advertise during your vacancies so your public exposure only needs to be a minimum. think anonymous and not link any properties together on the interwebs unless necessary. Only your bank needs to know your portfolio. You get even more anonymity by advertising through a property management company where renters dont interact with the owner at all. That only applies if thats part of your model. I have a mix of PM managed and self managed, but I'm going to all PM managed for new acquisitions as a grow my portfolio for more passive approach since I have a full time job and live farther than 1 hr away from those properties.

I dont know what your concern is with the credit card? umbrella covers liability claims against you as a person and your rental business. Your credit card has zero bearing on that exposure. its just a payment vehicle. no one even looks at whats embossed on it or what your signature is for that matter.

Logan I. · Answer

Thank you again. Great tip on Cozy and a lot to think about regarding the other suggestions.

Logan I. · Answer

Thank you @Frank Chin that's quite a story.

Billy Smith · Answer

Here is a thought, if you take cash show the income  on your taxes .

I carry a umbrella I have seen cons and pros on both .For a small shop umbrella seems to be the right fit.

Frank Chin · Answer

I agree with @Jeff Bridges about keeping a low profile and careful of slimy tenants. I would also get them to have renters insurance to protect your self against bonus liability claims, such as I was burglarized because of your poor security. It happened to us. Your insurance company will cancel your insurance if tenants keep filing bogus claims. Your insurance normally does not protect your tenants belongings, no matter how large.

Talking about slimy tenants, heard of this that happened to someone. Tenant got owner taking cash for rent,  convincing the old woman she'll save lots on taxes not reporting it. Schmooze with her for a while till she admitted she didn't report it on her taxes. Then, one day told her he'll turn her in to the IRS if she didn't allow him FREE rent for a year. The frightened old woman did just that, gave him free rent.

Knowing of this, I insist on check or money order or epayment from tenants. Tell them I report everything so cash won't help me and will only invite burglars.

As to the business name not filed, it's OK, except you just can't deposit checks made to the fictitious name. As to the credit card, no problem. I closed a business a few years back and I used the credit card for a number of years afterwards. You're responsible for payments in any event, so the bank doesn't care. The only thing is you'll get a lot of junk mail for the fictitious business.

Logan I. · Answer

Thanks @Jeff Bridges, that is an angle I had not considered at all. Based on your advice, I've decided to password protect the site and only allow access to potential tenants that I am hand-selling to.

Any thoughts regarding the credit card?

Am I playing with fire on my umbrella policy?

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