By planning ahead, a real estate investment can be protected from damage, a lawsuit, or attempted real estate asset seizure. Many investors focus on investment and neglect the importance of protection. Let’s talk about how to protect your residential real estate investment so you can secure your assets and financial future.
Insurance is an obvious idea to most investors when considering asset protection strategies in real estate.
Insurance differs depending on the type of real estate. Coverage needs escalate as your real estate investment portfolio increases.
LLC (limited liability company)
An LLC is obtained to form a legal entity to own and operate a business. To minimize financial risk, you can purchase residential real estate under the protection of your LLC. Using this method, debt collectors can’t come after your home should your business run into financial trouble because the LLC protects it.
When adding a trustee to a property, using a land trust, the property owner isn’t required to have their name on record. This creates an anonymous owner.
Using the land trust as protection means, just as with the LLC, the property asset can’t be used by collectors as a source to pay a debt or a lawsuit if any such issues occur.
As a layer of protection on a residential property, adding a second name other than your own protects the property due to indivisibility. In other words, because the property belongs to two people, and only one has a lawsuit filed against them, the house can’t be taken away because the second person on the title also has an interest in it.
Homestead exemption laws vary by state. However, in many states, property is protected from the use of paying a debt due to a lawsuit or debt collector by claiming homestead status.
The exemption says the property’s equity is untouchable to unsecured debt collections such as credit cards. A secured debt—such as the bank which holds the mortgage—is not affected by the homestead exemption. Therefore, by law it can still take a house when a debt goes unpaid.
The best way to protect your residential real estate investment is to avoid risk in the first place.
Investing is risky, period. Without risk, financial gain seldom happens. Go about your residential real estate investments wisely, consider the items we mentioned as a way of protection, and don’t take any shortcuts when taking care of rental properties. No one goes into property investment expecting a lawsuit, but as we all know, life can surprise us. It’s best to prepare, just in case.
In conclusion, protecting your residential real estate investment requires wise choices from the beginning and extra effort in adding a safety net.
Voted “Best in Georgia,” Excalibur Homes offers full-service property management in Atlanta, GA, and all surrounding areas. We understand your concerns about protecting your investment and are here for all of your residential real estate property needs. Contact us today, and together we will find the solutions you’re looking for.