I need advice on protecting my assets. I own three small houses and am looking for suggestions that won’t cost an arm and a leg to protect them. Thank you
Protection from what? Fire flood windstorm crime what?
A liability umbrella? It’s cheap coverage… about $150-$200/yr. per $1M coverage.
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From being sued for whatever…
If the event took place already… it’s too late. What people do also is they put each house into a different corporation, so if you get sued concerning one property it does no affect the others.
Is an Umbrella policy any good? Event has not happened (thankfully)
Obviously you are worried about something. What exactly? Umbrella policy is not bulletproof, why exactly might you get sued? Sued by a tenant? Sued by a neighbor? And why?
I own three homes that are paid off and have gone up considerably in value. I have heard Realestate guru’s talk about different ways to protect yourself and it’s been on my mind lately.
Now that I think about it, I’m not sure if a PERSONAL umbrella liability policy will cover rentals, because that is commercial activity, not personal activity. I don’t know. Consult with a lawyer.
Talk to your insurance agent[s] Most all offer umbrella policies. Some suggest a $1m coverage, but the cost increase from $1m to $2m is comparatively small,
Umbrella policy is the way to go. Talk to your insurance agent. They can build the umbrella with everything you have in it. It’s pretty straightforward. You don’t need a lawyer.
We own a lot of real estate and 3 rentals is nice, but really not that many. One piece of advice I can give you is to NEVER allow you homes to be free and clear. You always want them to appear encumbered in the public records. This could be something as simple as a HELOC on each property.
Im not sure how much I would invest in asset protection given the number of properties. It may be sufficient to just have a PUP that covers all of the properties. If you want to really make things complicated, then you can research Series LLCs and Land Trusts.
Not challenging you, but please clarify. thnx
My liability umbrella covers all assets I own, including rental properties. Generally speaking, rental property insurance coverage is substantially more expensive than the insurance on your private residence.
And a liability umbrella will stipulate the minimum liability coverage for each risk you have. Some unusual risks, like when flying your own private airplane are exempt from umbrella coverage. But boats, if they meet the minimum coverage requirements are usually covered.
A liability umbrella is easy & cheap coverage.
Another way to manage the risk of title fraud is to obtain an Alta title policy and get an title opinion periodically.
Certainly…the first reason was also mentioned by @H200h which is to prevent title fraud. This applies not only to rental properties but also your personal residence. This is a very cheap defense strategy.
The second reason is our insatiable desire to sue everyone for everything. When your tenant files a frivolous claim…the first thing a lawyer will do is search the public records for assets that you own and determine if there is equity to attach judgments against. After all, an attorney doesn’t want to waste their time either. You want to look completely broke in the public records.
The PUP insurance strategy would be the next option because its again an inexpensive way to protect what you have.
While there is no fool-proof method to protect your assets from creative lawyers with litigious clients, doing something is better than doing nothing.
I think a best first step is to buy a liability umbrella policy. It works for most people for most exposures they will face. After that step, the next decision is usually a choice between a trust or some kind of business legal wrap, like an LLC or, in some states, for multiple rental properties, an SLLC.
The final plunge, for the folks who are really into a close relationship with lawyers who are adept at creating stacks of legal documents is to create a full-blown corporation with BODs, CEO’s etc.
Life with significant assets can be a PITA… 
A very reasonable approach for most people with a few properties. You can always make it more complicated as you grow the number of rentals. I prefer personally to have title vest in a Land Trust because you can make it really time-consuming and expensive to track down the owner.
Its a success tax…no doubt.
So interesting! Thanks for all the responses and the question…
So, if I get a HELOC but never use it, it shows as an encumbrance on an asset search?
And a note about umbrella policies that might be useful to some. I have an umbrella policy. That strategy failed for my father who stopped driving due to dementia.
I could not find any insurer that would write an umbrella policy for someone who did not have auto insurance. Your mileage may vary.
Yep…as a 1st position mortgage…and it shows the lien amount as the limit of the HELOC, not the actual balance.
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