Hi,
I was pondering about investing in real estate that will generate some rental income and I was told, that one of the biggest risk in this type of investment is that the renters may sue the owners for various reasons. I was also told that in order to protect oneself from such disaster, its best to form a company(LLC) and buy rental income under the company’s name. But the problem here is that if you are on a H1 its illegal to form a company for active investments. Now I would like to know:
What are the implications of buying a rental property without forming a LLC?
Is there any other way to protect oneself from being sued without having to form a company?
What are other advantages of forming a LLC, anything that can only be gained by a LLC?
Even if a person wants to just buy one Rental propety does he absolutely have to go that path (forming a LLC)
I’ve never transferred any of my property over to my corporation, it’s always been held in my name, and I’ve never been sued.
If you’re worried about being sued, get liability insurance, for any liability that you may directly cause to your tenants. If you’re wanting to be a slumlord, then maybe… Keep your properties in good repair, painted, and solid, and the tenants will not have any reason to sue you. Treat them fair and they’ll treat you fair!
I too have a few properties that I have purchased in my name; however I want to form a LLC to protect myself. Does anyone out there know if it will be difficult to place my previously owned propertied under the protection of a newly formed LLC? ;D
“Previously” owned properties? If you don’t own the property any longer, then you have no right to do anything with the title, even retroactively.
If your question is really about your currently owned rental property, then the mechanics are simple. Form your LLC, quit claim the property to the LLC, record the deed.
If you are worried about being sued, personally, quit claim the property to an LLC to protect yourself. Do this only after the title is seasoned (at least 90 days). It is prudent to not have more than 1 million dollars in each LLC. Tenants do sue all the time and win. Protect yourself.
This is of course a risk management decision. You must ask yourself if you consider your position/operation to be at risk of extensive litigation. The answer for most of us is no, and many times the best way to structure a transaction is to hold the property in your individual name AND buy really good liability insurance.