Before I go another step let me make clear that I am not a lawyer, or licensed in anyway to provide you with legal advice. What I am about to tell you is simply a strategy that I use to prepare myself to be sued sometime in the future.
With that said lets jump right in and get to it. I said that I use this strategy in order to prepare myself when I get sued. You may be asking yourself why I am preparing to be sued rather than using strategies to prevent myself from being sued. I'm simply keeping it real! And I suggest you do the same.
You see there are a lot of attorney's out there that make their living by suing people for other people. Even if you don't own any property or do any business deals your chances of getting sued are 1 in 4. When you own property your chances go up from there. Own 4 properties and your chances are about 1 in 1.
One simple way to protect you from personal liability is to deed your investment properties into a company entity. I have two different entities setup depending on the structure of the Real Estate Investment. I put rentals into a Limited Liability Company and Rehabs, wholesales and anything that I expect a quick sale and capital gains on. Consult your tax attorney or account to see what is best for your business.
There are a couple of things that you need to be aware of if you decide to deed your property into an LLC or Corp. First is that if you are using a bank to finance your properties you probably secured the loan in your own name. The bank expects that if you buy the property you will keep the property in your name. Well that's all good but it doesn't offer that layer of protection that having your property in your company name. If the bank wants there is what's called a due on Sale cause that the bank could use because it violates the terms of the mortgage. From my experience if you are making payments and don't give the bank reason to exercise this then chances are you will be alright. Again I am not an attorney so check with a professional that specializes in asset protection and Real Estate specifically.
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About the Author
Mr. Blanton is a season Real Estate Investor in Central Ohio.
