I read on this forum that having your property in an LLC will cause your homeowner’s insurance (or is it your umbrella liability insurance?) to cost more. Is that a lot more or a little bit more (or does it depend on the ins. co.?) Thanks.
Do you mean if you own rental property held in an LLC and have your personal residence outside of the LLC that your personal residence insurance will be affected? We have our rentals in an LLC and insured thru GuideOne Insurance. Our personal residence was insured w/ USAA (outside the LLC) until a couple days ago. We’re switching it to GuideOne as well because they were so much cheaper than USAA (a rare occurrence).
Having the LLC & rentals never affected our homeowner’s insurance at all. We don’t have an umbrella policy yet so I can’t speak to that.
I’m not sure I understand the question. An LLC cannot own a personal residence.
Sorry, I didn’t state what I meant correctly, I’m only talking about the rentals’ (held by the LLC) insurance for fire, windstorm damage, liability, etc. , not insurance for primary residence.
Haven’t had any problem with it. I even got a personal umbrella that covers the properties in the LLC.
Just an FYI, insurance on rental properties is almost always more than insurance on a comparable owner occupied property regardless if it is titled in your personal name or an LLC.
jmd_forest
I know I will have to pay more for rental policy in any event, but I was concerned that it would cost even more because of the LLC, or that some companies wouldn’t want to insure a property that’s under the name of an LLC. Thanks for the information.
I haven’t found the cost of insuring to be different when the property is owned by an LLC versus an individual.
Well, that is some good news–so much of what I read on this forum about LLCs is discouraging. Another good thing is that I found it doesn’t cost that much to start or maintain an LLC here in Fla.
I’ve run into more issues with banks not wanting to loan to an LLC rather than an insurance company not wanting to insure property held by an LLC.
There are pros/cons to LLCs just like anything else. You have to decide if it’s worth it to you. I have my reasons for having ours and I’m glad we use it instead of our personal name for investments.
These costs are small compared to the time and energy you will need to follow corporate formalities and record keeping. An LLC is not a one shot deal. It needs constant maintenance and stops working if you don’t keep it at it.
I have learned a lot from this board but it’s getting to the point where I need to pay to see a lawyer and get advice for my own personal situation. BLL, you and several other people here are extremely knowledgeable on this subject but I can see going through the threads there’s never going to be a consensus on this forum on who should get an LLC and when, and whether they offer true protection.
There is no way of answering this question, but I really wonder if a landlord is operating in a conscientious manner and documenting things carefully, how likely is it that they will have a judgement over their liability limits awarded against them? I know there are freak things like the McDonald’s hot coffee award but after all that suit was against a huge target, not joe blow investor with 3 houses. Maybe I’m being naive but I tend to think that most landlords who have multi-million dollar judgements awarded against them were not innocent victims of the system.
Just my 2 cents.
You are correct. Huge judgments are the result of bad acts. The McDonald’s judgment was so high because it was revealed they used an inferior bean to save money and increased the temperature to hide that fact.
Keep in mind very few cases end with multi-million dollar judgments that exceed insurance limits. Unless you have millions in net worth, you won’t get sued for millions as no attorney will take a case without a strong probability of a settlement or sufficient assets to pay the judgment. If you don’t settle a bogus claim, that is the end of the suit. If the case is valid, the attorney will settle for the insurance limits because he doesn’t want to front the cost of preparing for trial.
BLL, do you know whether a decision was handed down in this LLC case? It looks like it will be important, but I couldn’t find out the outcome on the web:
FTC v Olmstead 11th Circuit Court Case #06-13254
I haven’t heard of any decision, but then again I don’t recommend single member LLCs, except in very limited circumstances.
Another, more pressing and relevant issue, is the new use of charging orders. Judges are granting them such that the LLc cannot distribute money to any members or managers, cannot make large purchases, cannot sell major assets, and must appoint a receiver. How will you run your business if you can’t take money of the LLC, can’t buy property, can’t sell property, and have all the rental income go through the receiver? Sure, the creditor can’t get your assets, but neither can you.
I thought that was a good thing–if the LLC doesn’t make distributions, the creditor can’t collect anything but still has to pay taxes on the judgement amount?
On another forum an attorney mentioned that people should get an LLC because liability insurance co’s are now excluding “environmental” (I’m assuming that means mold and radon) lawsuits–do you know anything about this? This is one thing I was concerned about–if you have liability insurance can the insurance company refuse to defend under certain circumstances?
That is incorrect. If the creditor holds only a charging order and has no control of the LLC interest, then the debtor owes the taxes, whether or not a distribution is made. Even if it were true, you wouldn’t get any money out of the LLC either and you wouldn’t be able to conduct business.