If you're a real estate investor, you need ways to protect your assets.
A common asset protection strategy for a is to have one property per LLC.
That makes sense because if you have a lawsuit with one property, you don't want it affecting your other assets. That limits your downside risk. So in this situation, we have one LLC with one property held inside of it. We have a completely different LLC with another property held inside of it.
This is a great situation if you have a lawsuit that's going to involve this property. It's not going to effect this property.
One thing you might do to further increase your protections is to have a corporation which acts as your property management company. This property management company is completely separate from the LLCs, which hold your assets. Because it's completely separate, if you have a contractor sue you or a tenant sue you, if you have anybody else that deals with the business of running your real estate company that would sue you, this is the person or the entity that they're going to be able to sue. They won't have a claim against your property.
That's what we want. It protects your credit score from them suing you individually if you ran the business yourself and it protects your assets from anybody else getting to them.
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
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