Do You Own Your Rental Real Estate in an LLC?

LLC stands for Limited Liability Company and in many situations, its a great way to own your rental real estate. Why? To insulate liability.

LLC Asset Protection Example

Rhonda and Mike own three apartment buildings in their joint names. A balcony on one of the buildings collapses and a young engineering student plunged to his death.

A lawsuit is filed; the jury verdict is $15 million. Rhonda and Mike lose all of their investment and personal assets. They are both personally bankrupt; the real estate business is bankrupt.

OR

Penelope and Grace own three apartment buildings in LLCs. Each building is in its own LLC. A balcony on one of the buildings collapses and a young engineering student plunges to his death.

A lawsuit is filed and Penelope and Graces personal assets are protected because they didnt own the building with the faulty balcony; their LLC did.

The other two apartment buildings were not attachable because they were owned by separate LLCs.

The LLC held insurance on the affected building in the amount of $1 million. The building had a net value of $400,000.

The case was settled for $1.2 million.

Which Do You Prefer: Protection or No Protection

If you own rental real estate (or any other type of business), consult with a qualified estate planning attorney to determine whether an LLC is right for your individual situation.