The building has 6 units and is on the beach. The tenants frequently have guests over and children who run all around the beach and the building. I'm concerned that someone may trip or get hurt and sue! What can I do to prepare?
2006-07-14 06:55:17 · 5 answers · asked by Princess 1 in Business & Finance ➔ Renting & Real Estate
Convert the asset to an LLC
2006-07-14 06:58:50 · answer #1 · answered by 3eleven 4 · 0⤊ 0⤋
OK, this can sound tricky, but if you do it right, you are bulletproof. The very best way to do this is with two companies. An LLC owns the property, but first what you do is open a Nevada Corporation and stock it with some cash. Then the LLC "borrows" the down-payment from the Nevada company. It then registers a mortgage (a second) against the property. So in essence, you have no equity in the property, but a first from your bank and a second from your Nevada Corp.... Now, if you get sued, the first thing ANY lawyer will do is look to see if they can make some money on this. They work on a contingency bases which means that they take a percentage of what they recover.... So, they want to see if you have any assets to grab. When they see that the property is mortgaged to the hilt, they will not take the case as they will not be getting any money.....
If you do get sued, you may be forced to sell. The bank is first in line for cash, then the second mortgage (your company) and what is left over goes to the lawyer and the person doing the suing...... So, your equity is safe......
This is the basic way the rich protect their assets....
AND.... If you do it this way, your LLC passes tax advantages to you so you can lower your tax bill each year legally..... As time goes on and your build some equity back up, just refinance it with your Nevada Corp and pull the cash out of it TAX FREE.......
2006-07-14 16:24:39 · answer #2 · answered by maxgrunt 1 · 0⤊ 0⤋
Put the LLC or corporation owning your rental building into a living trust. If you already possess an LLC for rentals I'd place the units of ownership into the Living trust. If you have a pension I'd place the beneficial units of pension trust into the living trust. If it's a corporation, the stock shares should go into the living trust. Not only that but I'd probably put your regular house in the living trust, in case they try to sue you directly, and not the building. In such a case, your house would become collateral due to it being in your name. The less in your name the better. Everything should be within the jurisdiction of a specific corporation or LLC that you control, for best safety against being sued. Chances are, if you're owning buildings, you have an attorney and an accountant. I'd go to them for more advice.
2006-07-14 06:58:44 · answer #3 · answered by Answerer 7 · 0⤊ 0⤋
good insurance coverage, also write into the lease an express assumption of liability by the tenant and require them to carry insurance and prove it to you. lastly put your assets in joint name (only helps if the property is not in joint name)
2006-07-14 08:27:04 · answer #4 · answered by titanbooboo 3 · 0⤊ 0⤋
Have good insurance
2006-07-14 06:58:48 · answer #5 · answered by Funny Lady 3 · 0⤊ 0⤋