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Updated about 6 years ago on . Most recent reply

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16
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Alejandro Lee
  • Rental Property Investor
  • Diamond Bar, CA
4
Votes |
16
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is an LLC really necessary?

Alejandro Lee
  • Rental Property Investor
  • Diamond Bar, CA
Posted

Live in California and have 2 rental properties in Cleveland with a total value of 150K at most, is creating an LLC for each property a viable option for asset protection?

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Patrick M.
  • Rental Property Investor
  • Red Bank, NJ
1,762
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1,369
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Patrick M.
  • Rental Property Investor
  • Red Bank, NJ
Replied

I hold 2 multi-families in my own name. They are properly insured, as am I, and I carry an umbrella as well. If a a loss was so egregious to overcome my insurance then it would be no problem for a competent attorney to pierce the veil of the LLC.

I personally find absolutely no additional protection in an LLC. The majority of small landlord and small business owners I know that do have an LLC, co-mingle their LLC and personal accounts (credit cards, utilities, etc.) so much that a judge would not hesitate to allow the veil of an LLC be pierced.

I have also witnessed evictions halted because the tenant pointed out to the court that landlord held the unit in an LLC, necessitating the hiring of a lawyer.

I personally would not feel it is necessary for a small portfolio. But if you do it make sure you do it right and insulate it completely from your personal. 

Additionally having an LLC is no excuse to be underinsured.

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