real estate asset protection

Top 5 Best Ever Real Estate Asset Protection Tips

You’ve worked so hard to acquire your real estate properties, and you’re looking forward to generating money from them. However, in the back of your mind, you wonder if you’ve taken the necessary steps to fully protect these assets.

Fortunately, by taking the right steps towards real estate asset protection, you can rest assured that both you and your valuable properties will be safeguarded against any possible lawsuits.

1. Liability Protection

Considering the importance of asset protection, one of the smartest moves you can make if you own real estate assets is to establish a limited liability company, or an LLC, if you haven’t done so already. Why transfer a title to an LLC? Let’s say one of your tenants ends up slipping and falling on your property. Having an LLC in place is critical for protecting yourself against the negative consequences of a lawsuit that this tenant may file against you.

2. Maintain Your Liability Protection

Of course, initially setting up your LLC is only half the battle in your move towards real estate asset protection. You actually need to maintain your LLC as well, if you want it to work for you long term. For instance, you need to pay the state your annual fee. Also, make sure someone is keeping minutes at your company meetings and identify the resident agent you want to accept any lawsuit notice on your behalf.

Failure to do the above will cause your company to no longer be in good standing. As a result, a lawsuit that is successfully brought against you may cause you to lose all of your business assets and even some of your personal assets. So, remember to take care of your LLC and your LLC will take care of you.

3. Estate Planning

Estate planning is another proven tool for protecting your assets. For instance, you can set up a living trust and put your LLC into your trust. This will allow you to identify what or who specifically should receive your assets should you pass away. It may also decrease your probate expenses and drastically decrease estate taxes.

4. Equity Stripping

Another avenue for real estate asset protection is a process known as equity stripping. With this method, you can set up your LLC and then have your company mortgage your investment property’s equity. This essentially strips any equity from your properties.

The benefit of equity stripping, also known as an equity transfer, is that the smaller your equity amount is, the smaller your chances of facing litigation will be. After all, debt is essentially a type of asset protection, so go ahead and create it yourself.

5. Pursue Asset Segregation

Finally, when it comes to creating an LLC, note that other people can still obtain all of the assets in your LLC even if they can’t legally touch your personal assets. So, try to separate your real estate assets into separate LLCs. This will give you a much-needed safety net and help to ensure that other parties don’t get all of the investments and assets you have worked so hard to acquire.

Dive into even more of the best real estate legal advice and real estate asset protection tips when you subscribe to the Best Ever Show.

Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.

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Joe Fairless