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All Forum Posts by: Scott Kimminau

Scott Kimminau has started 2 posts and replied 12 times.

Post: 1 or more LLC's recommended?

Scott Kimminau
Pro Member
Posted
  • Shawnee Mission, KS
  • Posts 13
  • Votes 5
Quote from @Nathan Gesner:
Quote from @Scott Kimminau:

Please educate yourself on the pros and cons before making a decision. Too many people create LLCs with no understanding of the work involved. 

David Greene just talked about this on his podcast and it's a short version of what I'm going to tell you: https://www.biggerpockets.com/...

An LLC is useful for two things: anonymity and legal protection. In most cases, neither is warranted.

Warning: I am not an attorney and this can be a complicated topic. Please note the information provided below is a layman's definition designed to provide a basic understanding for the general audience. You should consult an attorney or CPA for your specific situation.

ANONYMITY: When you create the LLC, your name is recorded on the documents and published on the Secretary of State website for all to see. So you're not completely anonymous. If you want to be completely anonymous, you can use a Registered Agent. The Registered Agent will record the documents on your behalf so only their name and information appears on the documents. I've done this with my properties because I'm well known in my small town and don't want people to know what I own.

LEGAL PROTECTION: By placing your assets in an LLC, you are legally separating them from your personal assets. If someone injures themselves and sues, they will be suing the LLC and not you personally. If your insurance coverage isn't enough, they could seize the LLC assets, but not your personal assets.

Additional thoughts:

1. An LLC is not free. You can spend as little as $100 to form an LLC, or you could use an attorney and spend $1,000 or more. There are also additional costs of operating and maintaining an LLC, like separate bank accounts, annual report filings, tax filings, etc.

2. There are rules to follow! If you fail to follow the rules, you may open your personal assets to a lawsuit. An example of this would be mixing your personal money and LLC money in the same bank account.

3. You do not need a separate LLC for each property or a series LLC! Don't make your life more complicated than it has to be. Most professionals will recommend a separate LLC for every $1 million in assets but I don't think that's necessary. In my case, I have residential rentals in one LLC, commercial properties in another, self storage in a third, and my real estate company operates in a fourth. Some have more than $1 million in equity while others have less.

4. The need for an LLC is grossly exaggerated on BiggerPockets and other websites. Have you ever heard of a Landlord being sued by a Tenant and losing property? I've been on this board since 2010 and haven't found an example yet. You've probably heard of big Landlords losing property, but only because they were flagrantly violating Fair Housing, running a slum, or otherwise violating the law in an egregious manner. You are more likely to be struck by lightning twice. The vast majority of lawsuits against Landlords are for wrongful eviction, security deposit disputes, and Fair Housing Violations. Your basic insurance policy with $300,000 in liability coverage should be sufficient in 99.999% of all lawsuits.

5. The best protection for you and your investments? Know and obey the law. I manage around 400 rentals with 12 years experience and have never been sued once. Even if I were sued, I document everything and obey the law, so I won't be found guilty. Even if I were found guilty, the cost would be in the thousands, not in the millions. Insurance would cover it, I would pay the deductible, and no assets would be lost.

If you are in an area like San Diego where people are more likely to sue, a judge is more likely to find you guilty, and the payout is likely to be higher, then you may consider an umbrella insurance policy. This policy will provide additional coverage above what your existing policy covers. It's easy to obtain, costs very little, and doesn't require additional, on-going effort to maintain.



 Thank you Nathan! This is fantastic information!!! Thanks so much.

Post: 1 or more LLC's recommended?

Scott Kimminau
Pro Member
Posted
  • Shawnee Mission, KS
  • Posts 13
  • Votes 5
Quote from @Jake S.:

Okay so you can go a couple of routes. Id definitely recommend the LLC be in the state that the property is in. Ive heard some wont let any single LLC have more than 200k of equity (if it holds more than one property), at that point theyll utilize another LLC, refi, etc.

A route ive chosen to go down is, I have a parent LLC in Wyoming which owns the LLCs in each state and Ive decided to do a new LLC per property as Im going after a bit larger properties at this point otherwise Id stick to the rule above.

Next ill be starting a trust up that controls all of this. But still waiting on it.

I also use Stessa.com to bookkeep and they even have a banking feature now, making it easier to start up an account per property!


 Thank you Jake! This is great information and I'll definitely check out Stessa.com too. Thanks!

Post: 1 or more LLC's recommended?

Scott Kimminau
Pro Member
Posted
  • Shawnee Mission, KS
  • Posts 13
  • Votes 5

Hello! 

I have 4 rentals in Missouri and 4 in Kansas. I've heard a number of different suggestions on whether an LLC is even needed and/or just have umbrella insurance. I've decided to go the LLC route for protection. I've heard 1 LLC property so my question is should I do one LLC for all properties, or 1 LLC per state (may be easier for tax purposes?) or one LLC per property. What have you all found to be best?

Thanks!

Post: Responsible for tenants daughter slipping on porch with ice

Scott Kimminau
Pro Member
Posted
  • Shawnee Mission, KS
  • Posts 13
  • Votes 5
Quote from @Theresa Harris:

I would also not renew their lease when the time comes and make sure your lease in the future clearly states that tenants must have their own insurance policy.

Nathan is right, if the courts did their jobs claims like this would be thrown out.

They’re on a month to month so that’s likely going to be the case. 

Post: Responsible for tenants daughter slipping on porch with ice

Scott Kimminau
Pro Member
Posted
  • Shawnee Mission, KS
  • Posts 13
  • Votes 5
Quote from @Nathan Gesner:
Quote from @Scott Kimminau:


My personal opinion? People do this because far too many owners/insurance providers are willing to cave and settle out of court. If our justice system were fair, this nonsense would disappear quickly.

Post: Responsible for tenants daughter slipping on porch with ice

Scott Kimminau
Pro Member
Posted
  • Shawnee Mission, KS
  • Posts 13
  • Votes 5
Quote from @Nathan Gesner:
Quote from @Scott Kimminau:

Thanks Nathan! That’s what I’ll do first thing Monday. It’s the tenant’s daughter that fell and she doesn’t live there so it’s really like the mail man or Joe Blow falling on the property, this just happens to be her daughter. This is just blows my mind how people are and how insurance companies can even survive knowing this stuff would happen ALL the time. Ridiculous. 

You do not need to report this to an attorney. Your insurance provider has attorneys on staff that will handle it.

Here's how this works. The Tenant hires an attorney. That attorney writes you a letter asking you to file an insurance claim. Your insurance attorney looks at it and does some calculations. They could spend $10,000 in court defending this, or they can offer $2,000 as a settlement. It goes back and forth a few times, they settle, your tenant and her attorney both get some easy money and your insurance rates may go up.

You could ignore it like Karl recommends and they may decide to drop it. If they pursue it in court, there's a better chance of losing since your lease clearly states the Tenant is responsible for the snow and ice removal. It's like suing you for choking on a hot dog that they bought. The problem is that our justice system is always a crap shoot and you may be found liable even if you are innocent. The insurance company would foot the bill, but it's still a lot of time and stress on your part.

If it were me, I would call the insurance provider and ask their advice, then follow it.


Post: Responsible for tenants daughter slipping on porch with ice

Scott Kimminau
Pro Member
Posted
  • Shawnee Mission, KS
  • Posts 13
  • Votes 5

Thanks Karl! I’m hoping that’s the case. Yep, will def be a new line. The daughter doesn’t live there either (or not supposed to be anyway). 

Post: Responsible for tenants daughter slipping on porch with ice

Scott Kimminau
Pro Member
Posted
  • Shawnee Mission, KS
  • Posts 13
  • Votes 5

Thanks Richard! 

Post: Tenant and Guest Slip and Fall Liability

Scott Kimminau
Pro Member
Posted
  • Shawnee Mission, KS
  • Posts 13
  • Votes 5

Thanks Bill 

Post: Tenant and Guest Slip and Fall Liability

Scott Kimminau
Pro Member
Posted
  • Shawnee Mission, KS
  • Posts 13
  • Votes 5

Hi Andrew

Curious if you found out any more info on this? I just received a letter from an attorney saying that my tenants daughter slipped on the porch and went to the hospital. Lease states tenant is responsible for snow and ice removal so would think that may help a bit but I don’t know. Just seems like this type of thing could happen all the time. 
thanks! 
thanks