Rental Property in LLC - tax, insurance, etc

Rental Property in LLC - Tax, Insurance, etc

JY:
your CPA's recommendation offer a perfect solution in perfect world, but in real life it is not really a feasible option.

1. in term of tax, single member LLC is a disregarded entity, it will not show up in your 1040 nor will save you any tax dollar.  to use an LLC as some sort of tax shelter, you need to form a multi-member LLc.

2. in term of liability, single property LLC does offer best liability protection but please bear in mind, single member LLC can be easily piercing thru in court, and as to liability that is what insurance is for, small 
landlord should carry 2mil in liability insurance + 1 mil in personal umbrella.

3. in term of insurance, you may require to put LLC as primary insured and yourself as additional insured, and you may have forced to pay high commercial rate.

4. in term of LLC registration, all states require some form of government registration, cost can be low as $25 a year to $800 a year.

I usually form an LLC for each 2mil NET WORTH of assets, just under max liability insurance coverage, but one LLC for one property is not really a good feasible option.

Questions:

for #2 you mentioned, could you explain a little more on the coverage of liability insurance and personal umbrella? 

If my rental properties are under my name, will the 1 mil personal umbrella cover the liability needs? what benefits will the 2mil in liability insurance bring to me?

JY:
depends on where you at, most state only require 300k or 500k in liability coverage, but to better protect yourself, you should raise your landlord policy to minimum of 1mil coverage, cost is very minimum.

in additional, a personal umbrella will kick in in to cover you if in any event your landlord policy exhausted all its liability coverage.

personal umbrella only covers up to 4 properties, anything above that you should seek a commercial umbrella policy.

If in a MFU situation, 2mil liability coverage is a must, 1 mil per occurrence and 2 mil aggregate.

your landlord policy consisted of 2 parts, replacement value of your structure, and liability in any event your tenant(s) got hurt while live in your property.

so to answer your question, in any event that your house burns down, rebuilding is the easy part; but if your tenant die in the fire, and sue you for negligent, without liability insurance, you and your family's hard earned wealth will be at risk.