A common asset protection strategy for a real estate investor as to have one property per LLC. And that makes sense because if you have a lawsuit with one property, you don't want it affecting your other assets.
Say we have one LLC with Property A held inside of it and a completely different LLC with Property B held inside of it.
This is a great situation. If you have a lawsuit involving Property A, it's not going to affect Property B.
To further increase your protections, you should have a corporation which acts as your property management company.
This company is completely separate from the LLCs, which hold your assets. And because it's completely separate, if you have a contractor sue you, if you have a tenant sue you, if you have anybody else that deals with the business of running your real estate company that would sue you. The property management company is the entity that they're going to be able to sue.
They won't have a claim against your LLC properties (Property A and Property B). And that's what we want. It protects your credit score if you are sued as an individual (if you ran the business yourself) and it gives you the asset protection you need.
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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