Should you put your rental property into an LLC?
If you want to put your rental property into an LLC, check with your CPA and insurance company first.
Attorney Tom Olsen: Rick, you're on News 96.5, go ahead.
Rick: Good morning Tom, thanks for taking my call.
Attorney Tom Olsen: Sure.
Rick: Question. My wife and I own four rental properties, and we have individual homeowner’s insurance on that. We're looking to see what's the best way to protect ourselves. One option is an umbrella insurance policy over all of them, or do we create an LLC for each house or one LLC for four houses?
Attorney Tom Olsen: Rick, you're not going to find one great answer that solves your issue. It's not going to be like a light goes off and it says, "Oh, that's the way I'm supposed to do it." Rick, if you want to do LLC or LLCs on these, I'd want you to do two things first. Number one, I want you to run it by your accountant or CPA and get his or her approval on it.
Number two, I'd want you to run it by your insurance agent because some insurance companies will not insure your rental properties if they are inside an LLC. Sometimes that's just a game stopper right there. Now, Rick, when people come to me and they say, "Tom, you know we've accumulated some wealth in our lifetime, we want to protect it." I tell them, "Your best defense is to be well insured including having an umbrella policy."
Rick, that's some options there for you. You mentioned doing an umbrella policy, I think all in all that may be your best bet. I'm about keeping it simple and that would be a simple plan, simpler than having one LLC or four LLCs. That's my thoughts on it, Rick. I wish you good luck to it.