If you want to become part of the real estate, having an asset protection strategy is crucial. Real estate investing can be challenging and has its pitfalls, like most industries. Having if you have a plan in place, you can secure your property and reduce the risk of losing money. Here are some tips for protecting your real estate assets and maintaining the value of your investments.
Get Insurance
Insurance is a popular strategy for asset protection in real estate. The coverage you choose for your real estate depends on the type of property you have. For instance, you should protect your house with a homeowner’s policy, but you should use a business policy for commercial property.
As you enlarge your portfolio, your insurance coverage should increase. Eventually, you should think about an umbrella policy that offers comprehensive coverage for all your properties.
Insurance can protect you against unexpected events, so talk to an insurance professional that will explain policies to you and help you find one that meets your insurance needs. Talk about the features and costs of your coverage and shop around before you choose the ideal insurance company for you.
Protect Your Investments with An Anonymous Land Trust
When you start investing in real estate, consider anonymity as a layer of protection. You can get an anonymous land trust to avoid legal action against your real estate. An anonymous land trust has a trustee, beneficiary, and grantor. If you have a trustee, you don’t need to put your name on the records. This way, if you face a lawsuit, the lawyers can’t connect any of your properties to your trust. If you put your house in a trust, you can protect your investment by discouraging anyone from pursuing a lawsuit against you.
Consider Titling
Titling your home can be an ideal protection strategy as well. If you’re married, you should have your spouse as an equal tenant to get indivisible interest. If your husband or wife is facing a lawsuit, creditors won’t be able to claim your house since you have interest. Keep in mind that indivisible interest only applies to personal residences. For commercial assets, you’ll need an investment property. Check the laws for your state, since some areas don’t have exemptions for titles. Speak with your lawyer and real estate agent to learn about specific regulations for your region.
Get an LLC
Get limited liability for your rental property to protect your assets from lawsuits. Having an LLC for your real estate assets means that debtors can’t acquire your home as payment for issues that may arise in your business. Instead, the corporation will cover these costs. You can purchase your home with an LLC and rent the house to yourself to cut down on financial risk. This decreases the chances of real estate asset seizure. Make sure you’re aware of asset transfers so you won’t have to pay fees for fraudulent practices. Your commercial real estate properties should be in different LLCs so one of your assets is at risk, your actual property will still be safe.
Maintain Debt
Surprisingly, debt is an affordable way to protect your real estate asset. When you have debt, available equity doesn’t matter. If creditors see that your income is low, they’ll be less likely to come after your property.
Once you decide to invest in the real estate industry, you don’t want to ignore the strategy of having debt. Continue to pull the equity from your property and reinvest these funds in other financial projects. This method ensures that you won’t have equity that attracts creditors. You can place the “loan”, which is tax-free, under or spouse or children to minimize risk even more.
Decrease Assets
If creditors are demanding their money from you, you may want to get rid of your real estate asset. If the property isn’t under your name, a lawsuit can’t affect you. Consider transferring ownership of the real estate asset to irrevocable trusts.
With a trust, beneficiaries can receive income after a certain period. Or, you can choose to gift assets or monetary amounts to family members. With a gift tax exemption, you won’t incur liability if you stay within the minimum amount. You can also get an advance to protect your assets.
These tips can help you protect the real estate assets you have and give you the strategies you need if you want to acquire more property in the future.
