tryan!!! (and other landlords)
- Thread starter devo
- Start date
A $1-$2 million umbrella insurance policy would probably be easier and cheaper. LLCs are nice but can be expensive and a pain to maintain.
If you start to accumulate lots of rental properties > $200k each then it's time to look at an individual LLC for each property.
If you start to accumulate lots of rental properties > $200k each then it's time to look at an individual LLC for each property.
tryan
Thinks s/he gets paid by the post
- Joined
- Mar 25, 2005
- Messages
- 2,604
I wouldn't do an LLC for a single property ... liability insurance on the place is the first line of defense; then an umbrella. These are much more cost effective protection. If you REALLY want to save $$ ... try getting a rider on your home policy for fire AND liability (most insurance companies require the places be in the same state - I believe). Did this once ... hands down the BEST rate.
If you "grow" - aquire more - then look at an LLC; I did an S corp to split the wad between liened (signed personally) and free n'clear. Tax prep is expensive and an LLC would have elminated the tax prep (>1k/year). Either way (S corp or LLC) the set-up fees far exceed YEARs of liability insurance premiums.
Welcome to the wonderful world of SlumLandlording.
If you "grow" - aquire more - then look at an LLC; I did an S corp to split the wad between liened (signed personally) and free n'clear. Tax prep is expensive and an LLC would have elminated the tax prep (>1k/year). Either way (S corp or LLC) the set-up fees far exceed YEARs of liability insurance premiums.
Welcome to the wonderful world of SlumLandlording.
One of the problems with corporations is that if you don't dot all the i's and cross all the t's every year then you will lose liability protection. Make sure to hire a lawyer/law firm who can stay on top of all the requirements. If you tried to handle it all yourself, 9 times out of 10 you'd screw up and then it would be worthless if you were sued.
With the run up in real estate values, even the landlords most likely to be sued (slum lords, as tryan aluded to) only make a 4%-5% yield on their properties. I don't know why anyone would risk unlimited liability for such a poor yield, but lots of folks do.
With the run up in real estate values, even the landlords most likely to be sued (slum lords, as tryan aluded to) only make a 4%-5% yield on their properties. I don't know why anyone would risk unlimited liability for such a poor yield, but lots of folks do.
tryan
Thinks s/he gets paid by the post
- Joined
- Mar 25, 2005
- Messages
- 2,604
Even then many scew-up ... I was incorrectly guided into filing for a C corp
.Got a nasty lesson in double taxation. Then refiled for an S Corp. Only to learn about MA annual filing fees and accountant fees ... can't "play office" with these things.
calmloki
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
tryan said:
What you said on fire insurance - I think we were able to put up to 3 extra houses on our home policy. We're probably woefully underprotected - fire policies on everything and a liability policy for them all. S corp kept being attractive, but I just couldn't justify the expense vs. value. Instead I try to rent in such a way that people should be ashamed to sue us. Yeah - THERE'S some good protection! Any of our old places start looking like slums it's time for new tenants.
tryan said:Even then many scew-up ... I was incorrectly guided into filing for a C corp
Got a nasty lesson in double taxation. Then refiled for an S Corp. Only to learn about MA annual filing fees and accountant fees ... can't "play office" with these things.
I hope they refunded your fees. That is outrageous.
Devo, if you are the sole owner (no spouse, no one else), a single member LLC (if allowed in your state) is totally ignored for tax purposes and is very cheap and easy to set up and maintain. Make a quick call to a lawyer in your state to find if you can do a single member LLC and what it would cost.
But I do agree that of utmost importance is having good insurance coverage. We live in a four unit building we own. To preserve the benefits of reduced homestead taxation in our state, we own it in our names. But we have good insurance and a healthy umbrella. And it goes without saying that we keep it maintained and treat our tenants well.
