Should I put my property in an LLC or Trust?
You’re ready to invest in a property, but you’re concern about the liabilities that come with renting it out. Here is a checklist to prepare you to make a smart decision on whether you should put your property in an LLC or Trust. Having as much protection as possible is very important, but protection does…
Having as much protection as possible is very important, but protection does come at a cost, so many individual landlords might start with one property, purchase it individually under themselves, be told that they can’t switch it under an LLC, and then keep it and forget about it. If something happens, they might get sued, and they’re going to be personally liable for it.
Having an insurance policy with an umbrella might be able to cover you to a higher limit. Typically, the master policy might cover you, but again when things get really bad, you need to have that additional layer of protection and that’s what a Trust or an LLC may do.
Let’s know more about LLC
Our founder, Jarrett Lau, personally put his properties in an LLC or Limited Liability Corporation and what that does is creates a separate tax ID. He pays about $500 a year to be able to renew the LLC as well as to provide the cost of any type of tax return that’s necessary to file the separate corporation that he has now created.
You may say that there are a lot of costs involved in doing it. Yes, there is an upfront cost with an attorney, or you can do it yourself. It is pretty simple, but again we always suggest seeking help from an attorney. We have great ones that we can refer to you.
After he purchased his property, he puts it in LLC, and then he gets an insurance policy. Once he created an LLC, he will ask for help from an attorney to have an additional layer of protection so if something happens at the property, it goes against the insurance policy of the actual business itself. The business itself may be charge rather than him. They can always still come after you, but it’s just that additional layer of protection that you might have. You might say, “Well how many properties do I put into LLC? One or two?” It depends upon your risk factor.
Expert advice that you should take note of
What we usually do is put two or three properties in each LLC. It depends on the size of the properties. If the property is much larger, we might just put one. If they’re smaller, two or three units or condos, we might put multiple. It just depends on your risk. Our founder, Jarrett Lau, only has two or three and he will create one, so he has several LLCs. Each one again has its insurance policy, tax ID, and its tax return. But it does add those layers of protection. And of course, your property should be able to be profitable enough to be able to have offset these costs that are revolved with it. Again, the protection that you have is invaluable.
If you or anyone else, you know is looking for a property manager to help protect you and think proactively. To be able to guide you through the steps of putting your properties into both LLC or trust. Please think of Green Ocean Property Management, where you get more than a property manager, you get piece of mind.
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