Updated about 7 years ago on . Most recent reply
LLC. vs Private Ownership
I'm trying to figure out what is the best way to hold rental properties. Is it better to place them under LLC's or hold them under your name and then carry an umbrella policy to have more liability coverage?
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Hey @Bryan Williamson,
As @Patrick I. mentioned earlier, it really does depend on what stage of your real estate investing career you are at. It all costs money, so my answers vary depending on your real estate portfolio. Feel free to check out this resources on some different approaches to liability coverage depending on the size of your portfolio.
The LLC will allows some separation from your assets and your own name. While I love insurance, it only covers one type of liability: accidents. The LLC can work as a stop gap in case something occurs in your personal life or the real estate property (properties.) To avoid the Due on Sale clause you can also put the property into a Land Trust, and assigning that to the LLC - that wont trigger the same alarm bells as the LLC for a bank, allowing for the same financing options you would expect. Once again, it is advisable to have a conversation about this with you banker prior to taking any action.
A good question to ask! The issue with a lot of these issues is that it all must be done proactively. Once a law suit has been filed it is illegal to transfer properties.