What is Wealthy Landlords Margin of Saftey Strategy?

Question

I want to be a landlord,but with all the problems today such as getting sued by tenants,enviromental issues,and the list goes on.How do wealthy landlords protect their investments,and keep wealth,and from such problems?I was at a RE seminar, they said the best strategy is don't have your name on none of the property's.

In order to not get sued,and nor having getting tax like no other by the govt.They stated file your business as a coporation to take advantage of the tax ductions.Then Form a "Family Liability Partnership",and you make your coporation as a partner.To keep yourself seperated from such law suits,and such.Also do this chairaty thing,in order to not get capital gain tax.

Another thing I'm asking is before you buy any property for a rental investment.What's your margin of safety strategy you use on all property's that will give you indicators to buy the property or not? Basically the simple question I'm asking is what is the best defence out there?

Jimmy NA · Answer

Are you even familar with the real estate business? I know many, many landlords have been sued for a variety of reasons.

Michael Rossi · Answer

Are you kidding me? I don't know of a single landlord with more than a few dozen rentals who hasn't been sued. Well, in all honesty, I haven't been actually sued by a tenant yet, but I've only been in business for 3 1/2 years. I had one scumbag try to sue us but I found pretty good evidence that she was committing insurance fraud and I was able to get the lawsuit stopped by threatening to go to medicare and the prosecutor. I have another lawsuit pending right now, where a Section 8 tenant who is totally disabled claimed that she fell in the water meter. I suspect that her son or a friend of her son was hiding drugs in the meter IF SHE ACTUALLY FELL IN THE HOLE AT ALL. How that is possibly my fault is beyone me, but she has one of those scumbag contingency lawyers that advertises on TV and YES she is trying to win the lawsuit lottery. It's nothing but EXTORTION! Unfortunately for her and her scumbag lawyer, we will fight it to the end and they will probably eventually drop it. Her lease just expired and I'm not renewing it. It's also likely that I'll tell every other landlord in town about her scam! Good Riddance to her! No lawsuit epidemic? Who are you kidding? Mike

Frank Adams · Answer

Well sun; welcome to the site and the wonderful world of REI. I would caution you against listening too much to people with an agenda. That would mainly be people with a FINANCIAL AGENDA; politicians and "gurus". The first want you to vote for them and not pay attention as they loot the public coffers, the second just want your money directly. There is NO LAWSUIT epidemic in the US! There is no great mass of schemers lookiing for people who appear rich so they can sue them and win the "lawsuit lottery". That is a myth propogated (mostly) by Republicant politicians. There is NO TAX ADVANTAGE to chaning the way you structure your business! Structure it incorrectly and there can be a tax DISADVANTAGE though! My advice is to STOP paying for seminars and CDs and STOP LISTENING TO TALK RADIO. Keep reading this site and otehrs, post your questions, and read everyone else's questions and answers. all cash

Mike W. · Answer

an umbrella policy that attaches to all your insured assets is the easiest and cheapest defense for a newb. Don't worry about making it more complicated til you have done it for a while. I use 12 unit building or larger before an enitity to hold. Holding SFR in your own name has a number of benefits, especially if you die. If you have a complex scheme for holding your properties and you die, your family may not get your properties if your will is not structured properly or God forbid you have no will. Besides, if you run a stand up business and don't screw your tenants and you pick tenants well, you may have no reason to be sued...I have never been sued yet in 8 yrs.

N/A N/A · Answer

As a lawyer in Louisiana, I'm not sure what a Family Limited Liability Partnership in Nebraska is. But, a Limited Liability Partnership isn't a bad thing, because it allows you to limit your liability to your property. Much like a corporation or L.L.C. I think it would be better to speak to an attorney in your state who works in this area. Also, I'm not sure how different corporations would help you if you're under one management corp, or you've got your financing set up with several properties being paid under the same bank loan. Each state is different with different laws on the books. Seek advice from an attorney from your state. Good luck!

Michael Rossi · Answer

Sun, The rental property business is like any other. As a business owner, you are a BIG target for all the down and outers in our society who are hoping to win the lawsuit lottery. With rental properties, it is smart to divide your properties up into different LLCs. Limited partnerships are not the entity of choice to protect real estate assets. In addition to placing your properties in entities, you should have insurance. Finally, to be successful in the rental business, you certainly should buy each property at a BIG discount. Good Luck, Mike