Estate Planning? Real Estate Investor?

The 2 Strategies To Protect Assets For Real Estate Investors

AnaMVeliz-The2StrategiesToProtectAssets
Edited by Ana M. Veliz

The Benefits of Incorporating Your Real Estate

Real estate investing is not without its potential risks and liabilities. If a person’s properties are held in their own name, they could be personally liable for damages arising from accidents or other events at the property. 

To protect themselves, investors should register their real estate under business entities which can create an effective barrier between them and any court cases linked to the investment property. This reduces the risk of legal action being taken against personal assets such as cars, homes and bank accounts if faced with costly litigation involving one’s investments

Steps for Incorporating Your Real Estate

To protect your real estate assets, the smart move is to create a LLC and acquire property through the company. This structure safeguards you as an individual by ensuring that your investments remain in corporate hands. Moreover, investors tend to benefit significantly from tax advantages when forming an LLC instead of a corporation – be sure to discuss this with your accountant for more details!

If you own one real estate investment…

Protecting your real estate investments is essential to a successful investment strategy. By forming an LLC and purchasing the property under that name, you create legal separation between your personal assets and any lawsuits aimed against the property; similarly, this also safeguards the property from potential litigation targeting yourself personally. It’s important when establishing these protective measures that they include “charging order protection,” as this area of law continues to evolve over time – relying solely on educated guesses could be detrimental in such cases.

If you own multiple real estate investments…

For real estate investors who own multiple properties, it is often tempting to place all of them under one LLC in order to reduce the maintenance and paperwork. However, this move can be riskier than a sole proprietorship as any legal issue affecting just one property has the potential to impact ownership of all your investments.

Real estate investors can leverage the power of a multiple-entity strategy to protect their investments, maximize potential profits and reduce risks. This approach involves forming LLCs for each property owned with charging order protection if needed in case one asset is subject to litigation or other legal action. Through this structure, it ensures that all properties remain protected from any issues related to an individual entity while still allowing owners maintain control over and benefit from every asset.

For additional asset protection, a Delaware Series LLC can be an effective strategy. This type of Limited Liability Company offers the opportunity to create individual series with distinct membership interests and liabilities that are legally separated from each other; meaning debts or expenses associated with one cannot affect another. What makes this solution even more attractive is it requires only one annual Franchise Tax payment for all its separate entities! An illustration below explains how real estate investors benefit from setting up an LLC structure as such.

The series LLC structure allows investors to take advantage of tax savings while distinguishing their real estate investments from personal assets. Every property held by the LLC is titled under a unique series, providing enhanced protection and peace-of-mind for owners.

Forming a series LLC has many advantages, yet there are certain considerations to keep in mind. For instance, while the legal separation of assets and liabilities may be recognized by most courts of law, banks may have difficulty comprehending this structure; leaving each series unable to open its own bank account.

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    About the author

    Ana M. Veliz

    Ana M. Veliz, a Spanish-speaking attorney, has more than 25 years of experience providing dedicated assistance to Miami families in these select areas of the law.

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