You’ve worked tirelessly to acquire your apartment properties, and now you’re eagerly anticipating the cash it will produce for you. Nevertheless, in the back of your mind, you ask yourself if you’ve taken the needed steps to fully safeguard these assets.
The good news is, by taking into these 5 action tips towards real estate asset protection, you can feel confident that both you as well as your valuable property will be protected against any type of legal claim.
Liability Protection
Considering the relevance of property protection, if you have not created one already, one of the most intelligent moves you can make if you possess apartment properties is to establish a limited liability company, or an LLC. Why? Transferring title to an LLC protects you in the case a tenant tries to sue you for a slip and fall he or she incurred on your property. With an LLC in place, you are protected against any adverse effects of a lawsuit or claim.
Maintain Your Liability Protection
Of course, initially setting up your LLC is only half the battle in your move towards asset protection plan. You actually need to maintain it as well, if you want it to work for you long term. For example, you have to pay the state your annual fee. Also, make sure someone is keeping minutes at your company meetings and identify the registered agent you want to accept any lawsuit notice on your behalf.
Failure to do the things mentioned above will cause your LLC to fall out of a good standing status. 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 keep your LLC in tact and your LLC will do the same for you.
Estate Planning
Estate planning is another proven tool for protecting your assets. For example, 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.
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.
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.
Are you interested in learning more about creating turnkey passive income and generational wealth through multifamily apartment investing? Visit www.syndicationcapital.net for more information, resources, frequently asked investor questions and our free e-book – How to Passively Invest In Multifamily Apartment Syndications.
