#RichLifeLawyer Show 019: How to Protect Yourself from Your Rental Property
#RichLifeLawyer Show 019: Protect Yourself from Your Rental Property
I run into people all the time who own a rental property or two. For decades we’ve all heard what a good investment real estate is.
Whether or not it is may be up for debate (that is a topic for another post), but there is no doubt that there are a lot of people out there with real estate they rent our via airbnb or on a monthly or yearly term to people.
What most people don’t realize is they may be opening themselves up to a great deal of liability if they aren’t careful about how they structure the ownership of their rental property.
What am I talking about?
How a Rental Property Can Ruin Your New Worth
Picture this. You’ve got a rental, titled in your name, that you have rented out on a yearly basis to a great family of four.
One day while the family is sleeping a hose on the heater comes loose, letting carbon monoxide into the house. No one could have planned it, but it causes a great deal of damage to your renters.
You call your insurance company, expecting the policy to cover everything.
But it doesn’t.
Several months later you receive a letter in the mail. It is a demand for $1 million dollars for damages caused at the house.
The freaking out begins immediately when you realize you are personally on the hook for everything that happened at that house.
How to Protect Your Personal Assets from Your Rental Property
The process of protecting your personal assets from your rental property is not difficult. All it takes is a little action.
To find out what that is, watch the video!
P.S. Do you have kids? Have you completed guardianship paperwork? Have you done it correctly? Click here to find out what happens if you don’t do anything: Are you okay with a judge choosing the guardians of your children?
P.P.S. Do you own a business? Do you have a plan so the business, and your family, can survive if something happens to you? If not, click here to learn how simple it is to protect your business and your family from tragedy: 5 Ways to Protect Your Business from Catastrophic Failure.
P.P.P.S. Do you have no kids and think you don’t need an estate plan? Single and think a will is only for married couples. You couldn’t be more wrong. Click here to learn more: 5 reasons estate planning is a must have even if you don’t have kids.
Christopher Small is a Kirkland estate planning attorney who helps people get rich and live forever. He is also the owner of CMS Law Firm LLC.
How to Protect Your Personal Assets from Your Rental Property Transcript
Hey everybody this is Christopher Small and this is episode nineteen of The Rich Life Lawyer Show. I am super pumped to be here today, we’re gonna talk about real estate, we’re going to talk about renting, we’re gonna talk about LLCs and we’re talking about how to protect your personal wealth from your business interests. So should be super exciting. If you don’t know me, Christopher Small the owner of CMS Law Firm a Seattle based estate planning law firm. I’m excited that you’re here. Let’s talk about basically one of the biggest problems I see with people that own real estate on rental properties in particular and this mistake is huge opens and look up to tremendous amounts of liability, tremendous amounts of personal exposure, and that is not putting your rental properties into their own specific LLC.
And this is one room rental property, one LLC. There’s a reason for this. If you own your rental property and it’s in your name, if something happens on that property, they, the person that’s injured has the ability to sue you personally. If your property is in an LLC, the ability for the person is injured to sue you ends. The most that they can do is attach whatever is a part of that company. That’s the reason why you want to do each property in its own LLC. If you put four properties in one LLC, something happens on one of them, then the person that’s injured could potentially attach their judgement to all of those properties. It’s a huge problem that I see with people as they begin to occur wealth, as they begin to consider their future.
They begin acquiring these rental properties on the side. They don’t protect their interests by putting them into separate LLCs. It’s sort of like not preparing for a market crash, one outside influence, one event, can really ruin all the work that you’ve been doing for your entire life to build up your net worth. So, step number one, put the property in an LLC. If you have a mortgage on the property, you’re going to do a couple of extra things that I’ll talk about maybe in the next video but for now just know that if you have a rental property and it’s in your name, you are open to some relatively high amounts of potential liability and potential exposure personally.
If you have questions about that, call a lawyer that knows this stuff. They’re all over the place. You can call me if you want and I would love to help you out. But call someone. Get it taken care of. Don’t let this wait because again, it’s a big deal. So that’s it for today. Hope you enjoyed this little tidbit. This little nugget. Hope it would save you some money. Hope it would save you some sleep at night and I’ll catch you next time.