Investment Property in LLC or Umbrella Insurance Policy?

[Chau Nhan]

Hello!

Thanks in advance for engaging in my question. I'm in the process of hunting for my first deal in Houston, Texas. 

Which do you think is better or the pros/cons to protect my personal assets outside of the investment property? 

- Closing the home under an LLC

- Closing under my personal name then transferring the property into an LLC

- Umbrella insurance policy on top of home insurance

- Other?

Much appreciated! 

[Chau Nhan]

Quote from @Levar Burton:

Quote from @Chau Nhan:

Hello!

Thanks in advance for engaging in my question. I'm in the process of hunting for my first deal in Houston, Texas. 

Which do you think is better or the pros/cons to protect my personal assets outside of the investment property? 

- Closing the home under an LLC

- Closing under my personal name then transferring the property into an LLC

- Umbrella insurance policy on top of home insurance

- Other?

Much appreciated! 

So to add on to my original reply. If you buy a property in your name and want to put it in an LLC I think you are going to have to weigh the pros and cons. I have one property in my name and one in an LLC. There is definitely more work added on when you have a property in an LLC. For example getting an ein and opening a bank account, doing taxes and putting public utilities in the property name. As well as trying to figure out whether some of those things need to be put in the LLC's name.

That being said if you are putting the property into an LLC for liability reasons then you have to ask yourself if putting it in an LLC is worth the time and effort versus just getting umbrella insurance.

The property that is in my name I was going to transfer it into an LLC but changed my mind. I just remember my lawyer saying that it can sometimes be an issue with the lender. Apparently they don't like people doing that. It worked out for me, had I done it I wouldn't have been able to get a heloc on my house.

Thank you, this is helpful. Seems like an umbrella policy is the right move. Much appreciated and best of luck in your real estate investment journey.