Getting started with passively investing in real estate. I’ll be closing soon on my first rental property. It’s financed by a bank with me as lender. I plan to buy 3 more properties, all in Texas. I will not be playing landlord, instead I’m paying property management. How much risk do I have when it comes to getting sued by tenants? TC: 230K #personalfinance #realestate #investments
You should operate as an LLC. Google and read more about it or talk to your CPA
Get insurance. Not getting insurance is cheap. but also chill out. You're fine. Especially in Texas there are like no tenant rights there
lmao this is gross
You should get landlord insurance which insures the property. You should also have umbrella insurance.
We rented out our former house after we moved for several years while we waited out the housing downturn for our house to regain its former value and sell. So, my advice is based on a dataset of one. The very nice religious family we rented to had a teenage son who wrecked the house. Holes in walls, frying pan shaped burn on countertop, etc. He got arrested for drug dealing which could have put our investment at risk (didn't happen, but scary nonetheless) They sneaked in a vicious dog which attacked me when I went over to check on an HVAC problem at their request. We gave permission for the dog they showed up with to live there because the dog was fine. We didn't expect them to adopt a vicious dog later. Not did their wonderful son warn me before I went in the backyard to check the HVAC issue. The parents were hard workers and evidently worked late hours. The parents also didn't speak English. I was fine with the teenager translating, but instead they just left all dealings with me on the house to a snotty 15 yo child. Not ok. We evicted them eventually and sold the house. If it hadn't been for the damage to the house and the stress of dealing with their son, we would have been happy with them staying forever and keeping it an investment property. Never again. If you go ahead, get an umbrella policy. Inspect often. If it's a nice house that would cost a lot to repair after the tenants trash it, just sell. If it's already a dump, try renting and good luck.
Can you get a countertop that can resist heat?
Yes, you can, but most you can't. Granite, and quartz and marble are ok but it will eventually weaken or discolor it over time. Laminate will burn right away. The only ones that's really safe to always put hot pans on that will not get messed up are stainless steel and soapstone, which are both high end/commercial finishes. Granite, quartz and laminate are typical in rentals and trivets should be used on those. The majority of people respect this.
Get insurance and set up an LLC. Your property management company will also have insurance. You’ll be okay. You can add an umbrella policy for a few million to your homeowners policy that will also step in if you ever get named personally in any lawsuit. It’s a few extra dollars a month (like a cup of Starbucks expensive).
Where did you buy umbrella from Allstate refuses to since I have properties in 2 states one in which they don’t issue policies
Don’t be a slumlord. Have a good relationship with your tenants. Those two things will reduce your risk by 99%.
LLCs are overkill. Umbrella policy is sufficient.
LLC can also be pierced if it's just for show. Consult a lawyer.
LLC is not that useful for just renting out a property as a side thing. No court will side with you if you argue for legal separation of liabilities or faults
This. Plus if your properties are mortgaged it's very difficult to transfer them to the company
Umbrella insurance should cover you for a couple of million
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You'll be fine
Fine with or without insurance?
Tenants who have to rent from individual landlords not in a position for frivolous lawsuits generally. Make sure lease contract and location allows for no cause eviction and normal rent increases.