LLC vs Umbrella Policy

[Ryan Duncan]

Hey everyone, 

I have a few rental properties and looking to add more to my portfolio. They are all owned personally and not under an LLC. I understand most of the pros/cons of having an LLC own my properties. Such as reducing personal liability. I also understand it can be harder to get financing for an LLC, and multiple LLC fees add up each year. At what point should I highly consider moving these existing properties into LLC's and purchasing new properties under an LLC?

My mentality now is that I can just carry good insurance coverage on each property along with a massive umbrella policy which pretty much should cover anything under the Sun regarding litigation. 

Any thoughts/advice would be very helpful! 

Thanks!

[Joe Splitrock]

Originally posted by @Ryan Duncan:

Hey everyone, 

I have a few rental properties and looking to add more to my portfolio. They are all owned personally and not under an LLC. I understand most of the pros/cons of having an LLC own my properties. Such as reducing personal liability. I also understand it can be harder to get financing for an LLC, and multiple LLC fees add up each year. At what point should I highly consider moving these existing properties into LLC's and purchasing new properties under an LLC?

My mentality now is that I can just carry good insurance coverage on each property along with a massive umbrella policy which pretty much should cover anything under the Sun regarding litigation. 

Any thoughts/advice would be very helpful! 

Thanks!

Anyone with significant equity or large personal net worth should consider an LLC as an added layer. At the end of the day, the insurance company is a bigger payout and they defend you to defend themselves. That is why insurance is even more important than an LLC. Unfortunately people think an LLC is a magic shield, but there are countless ways to pierce the corporate veil. For example self managing, having the mortgage in your personal name and comingling of funds with personal. All of these things put you personally connected to the business. An LLC generally doesn't hurt, it just doesn't always provide the protection people think it does. It also costs time/money to maintain an LLC.