It is only over the past few years that my wife and I have entered the world of investment Real Estate. I have always said that it is ok to lose, just not on your first try. So, let's assume that you have done everything right up until this point in time. You've purchased your property at a great price, renovated to add value and now you're ready to rent.
The next question you should be asking yourself should be, "How am I going to protect my asset from those that would look to take it from me?"
Well, after a great deal of research and a great deal of opinions, I believe we have determined a decent course of action for the newer investor. We looked into LLC's, Inc.'s, Trusts and a myriad of other options and we found that the easiest and most cost effective way of protecting our property was through the use of an umbrella policy. Now some of you are going to say that it makes you a target, or that it still holds you personally liable. This may be true, but the fact of the matter is that you really can't just place a property with a note in an LLC. (Not if the lender has anything to say about it, as it is a conflict in ownership). Also, trusts can many times be vulnerable to the ‘piercing of the corporate vale'. The litigating attorney sees that you are not only the trustee, but also the beneficiary and determines that the trust is truly not valid. The umbrella policies are great because they cover you from litigation not only in and around the property, but also if you're out driving, boating or what have you. Another little tidbit that we learned is that the insurance companies do not assign just any old claims adjusters to these policies. No, they assign their barracudas, the best of the best so that they don't have to pay out any claims. Some attorneys actually see it as a difficult target. You are protecting yourselves from gross negligence on your part and it takes a lot to prove.
The cost for an average policy of $1 Million dollars should run you about $200.00 per year. Not bad. You may have to increase some of your current limits on your existing policies, but it is all worth it in the end to protect the asset that you have worked so hard to create.
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