The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: Mr Saver 2000 on January 03, 2017, 09:22:28 AM
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We are currently renting my wife's house from before we got married. We tried to sell it but were upside down on it, so decided to rent it. We have been renting to the same tenant now for a few years and everything is going fine. The long term goal is to sell the property in 5 years or so.
My question is, does this property need to be held in an LLC? I am worried that we could be sued for something that happens on the property and our personal assets could be at risk. I have no reason to believe this will happen, i just want to make sure we are ok. The property has home rental owners insurance policy with a $300k business liability per occurrence. Is this enough coverage?
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I can't answer this from a professional legal perspective but for my own condo rental, I was comfortable getting $1 million umbrella coverage rather than going for a full LLC.
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Need is a strong word. Nobody really needs an LLC for liability protection, but lots of folks want one.
If you think the house is well maintained and you have a good relationship with your tenants, I probably wouldn't worry about it. Stay on top of the maintenance issues, spend regularly on upgrades and safety features, and check in with the renter regularly to ask about any issues or concerns they have. Keep good records of all of that, and you're unlikely to be successfully sued for negligence.
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whether or not $300k liability is enough depends really on your other assets.
If you want more protection, raise that, or, get a separate umbrella policy. They're cheap.
The LLC will cost more to set up, and adds cost or hassle every year when you file for taxes