STRs and LLCs and Insurance -- Asset Protection

[Joshua B.]

Hi All --

I read an earlier post on Biggerpockets about whether or not STRs should go into an LLC. My takeaway was that unless you have 10+ properties that it does not make a lot of sense. It sounded like it can be easy to "pierce the vail" of an LLC for a personal injury lawyer to go after personal assets (they sue the LLC and then they sue you). All things said... I feel like I can't protect against a situation where I get sued (e.g. someone slips and falls) and they "only" choose to go after the liability insurance on the property's policy, leaving the umbrella policy to pickup anything above/beyond the liability from the STR property. This seems simple enough and I could increase my umbrella coverage limits for added protection. However, how will I know a good lawyer will not stop there? I've been watching a lot of videos from https://www.strlawguys.com/ but this is going to cost a good chunk of change to setup a fairly complex protection structure. I'm curious what others are doing in this area and how worried I need to be about it (e.g. should I be thinking more than increasing the umbrella). I welcome your input! 

[Tim Welker]

Joshua,

My wife and I have 3 STR's. 1 in Missouri and 2 in Florida(1 is a condo and one is a house). We did set up a separate LLC and purchased and manage our properties finances through it. Our condo insurance has $500K of personal liability, and we also have 2 umbrella policies. 1 for Missouri and 1 fore Florida. We set up our LLC up front and it really wasn't a big deal. But was advised to also carry umbrella personal liability. Neither are that much and we feel we are well covered.

[Joshua B.]

Thanks Tim. Check out the video in the STRLawguys site. It was interesting in terms of how a good lawyer can get past an LLC.

[Andrew Steffens]

I have properties under personal and LLC. Usually LLC is more for loan purposes than liability purposes. I now have $5MM personal liability (I manage as well as own property). I find that sufficient.

[Tim Welker]

Joshua,

Thanks for the link. We set up the LLC more for financial separation vs personal asset protection.

[Nate Silver]

STR Law Guys - Jeff Hampton

[Sarah Kensinger]

We used Anderson Business Advisors to set everything up properly and have not regretted the couple thousand we spent, as well as the monthly fee for them to keep up all our legal and give us unlimited access to attorneys. I would highly suggest checking them out or anyone else similar. You're dealing with the general public and if you're serious about having a STR business it needs to be set up and run as such! Also, if your asset protection is set up right and you're only running personal STR, there is no need for all the umbrella insurance policies. It's a false sense of security anyway and could save you money in the long run. You're very right that lawyers don't stop at the insurance money if they can see everything you own. There are so many stories of people losing everything even with millions in insurance coverage. Plus, if everything is hidden from public eye you get to skip out on the petty stupid lawsuits. Lawyers know just by looking you up, that it's not worth their time or effort to take the case on. That is worth thousands to us!