Umbrella policy vs LLC

[Bourbon]

I'm wavering on taking the step to form an LLC for my rentals or just pick up an umbrella policy and let it ride. I have one property with ~50k equity in it, and am purchasing two more that will have ~$18k equity each after renovations.  Am I being pennywise in avoiding the LLC for a 1% better rate, or do I just need to look harder for better commercial rates? What do the landlords of MMM do?
 
LLC
Limited Liability in event of lawsuit
Cost $40 to form and ~$15 annually to maintain + ~175 in state taxes*
Commercial interest rates generally worse
Need to operate separate checking accounts
Somewhat attracted to the idea of using company name instead of personal name with tenants

Umbrella
Getting one anyway
Affordable at a few hundred annually
Better rates for lending, can continue to use low cost broker


*The LLET is the lesser of $0.095 per $100 of the entity’s Kentucky gross receipts or $0.75 per $100 of the entity’s Kentucky gross profits; or a minimum tax due of $175. A small business exclusion from this tax shall apply if a corporation’s or limited liability pass-through entity’s gross receipts or gross profits from all sources are $3 million dollars or less. If a business entity qualifies for the small business relief, the minimum tax due of $175 will still be owed.

[thedayisbrave]

You're going to get varying opinions on this.  Ultimately, I believe it's a personal choice based on how much in personal assets you want to protect etc.  Of course there are other methods of financing besides commercial loans such as private money but I would think that has even higher rates (but for maybe a shorter term). 

Anyway, for me the interest rate didn't matter as much cause I largely use private loans so I went ahead with the LLC.  I only have one property so far so sometimes I wonder if it was the right choice, but I'm glad I did it because it gives me a little more peace of mind.

I've heard various things on umbrella insurance.  Some say do it, while others say that if you do it, it signals to those potentially filling a lawsuit that you do have assets to protect.  It's a catch 22, and I haven't quite decided myself how to move forward with that yet.

Ideally I think you'd want to utilize both (LLC + umbrella insurance).

[Landlord iota]

I went with an umbrella policy for a couple of reasons.  One, an LLC would cost me several hundred a year just in small business fees from the state, on top of the registration fees.  Two, and more importantly, I cannot work my own evictions if I form an LLC; I must hire an attorney every time.  Because I own properties in a high tenant turnover area, this was enough incentive for me to skip the LLC for now and get an umbrella policy.

[Bourbon]

I went with an umbrella policy for a couple of reasons.  One, an LLC would cost me several hundred a year just in small business fees from the state, on top of the registration fees.  Two, and more importantly, I cannot work my own evictions if I form an LLC; I must hire an attorney every time.  Because I own properties in a high tenant turnover area, this was enough incentive for me to skip the LLC for now and get an umbrella policy.

If you don't mind me asking, how many properties do you hold and how much equity is in them?

[Landlord iota]

Not much; 3 properties (2 multis and a single) and I honestly have no idea about the equity given the high foreclosure area I'm in.  Edit: Less than $200k

[MaikoTsumi]

I lean towards umbrella policy.   The reason is if you have an LLC and the property is not well insured inside the LLC then you have given a Judge reason to pierce the veil and go after you personally.  If you are well insured, then what need do you have for the LLC?  YMMV.

[arebelspy]

I like umbrellas, but consult your lawyer/insurance agent/tax advisor for what is best for you.

[Bobberth]

One lawyer I know (not selling me anything) laughed at the idea of LLC as they are easily pierced.  Another lawyer I consulted (trying to sell me) suggested the extra protection.  She even went so far to say that "LLCs are relatively new in term of law, I would suggest a LP/GP combination as that has more law behind it".  I'm still going with just the umbrella.