I have a friend who I thought was smart. He has around 10M in income real estate. He held his properties in a single LLC. When a women as assaulted and he was found partially responsible, his insurance company for that property was will to make a full policy payment. But the tenants attorney looked up ownership of the property and saw it was an LLC. The attorney ran a title check with the County Recorder and found this LLC also owned many other properties. So the attorney did not accept as a full payment the 2 million offered by the buildings insurance carrier. Opting for an amount closer to the total assets of the LLC, 10 Million. So my not so smart friend offered them the 2 million payout from his insurance company, plus he'd sing over that property, worth 3 million. All because he had a single LLC and held title in that name. He could of had himself as an additional insured with an umbrella policy, or some secondary protection.

I think the Landlord Liability Policy plus an umbrella policy is the best way to go. But I know people who have each property in its own LLC, limiting the most likely exposure to the equity in that single property. But that would require 80 LLCs for you!

Pete-

Greetings fellow Hoosier!

I am a bit north of you and a lot smaller. I have all 23 doors in one LLC. I did it for protection as well as privacy. I know others local who have all their stuff in their names. They don't worry about it.

My LLC isn't my name and doesn't tie directly to me.

I agree with Mike45. Better to go with a big umbrella policy and, if possible, a landlord liability policy.

There are some state-specific exceptions, but remember that LLCs were never designed to limit YOUR liability. I know that sounds counter-intuitive to a "limited liability corporation." LLCs were designed to limit the liability of NON-MANAGING members. In most cases, that is NOT what we are. We are the decision makers. We are the managing member(s). Therefore, LLCs are not design to protect us.

Even doing individual ones for each property or group of properties does not necessarily protect the others from being sucked in. The LLC veil is fairly easily pierced.

The reality is that if you do something negligent at property A -- even if it is in an LLC -- and lose a lawsuit for millions of dollars... A decent lawyer will fairly easily show that you own multiple properties through multiple LLCs (as the managing member) and be able to collect through those additional properties.

Again, there are some exceptions and I am not a lawyer. But I think WAY too many people think that an LLC protects them when, in fact, they were never even designed to limit the liability of a managing member (which, again, is what all of us are).

They may OBSCURE ownership a bit to make it not obvious who owns it. But when we're talking about a lawyer trying to get his share of millions worth of a settlement, they will have no problem piercing the veil of all of those LLCs to show you as the managing member.

Pete,

Indiana LLCs are not strong protection.

I head up Bartholomew County Landlord Assoc and we talk about this stuff and more each week at noon on Zoom.

Hello from southcentral Indiana! We are a small company (our max was 6 SFH) and have sold most of our properties recently.

IMO this is a largely personal choice. We have an LLC. It does provide "limited" protection, and I just like the idea of having everything separate. We have a separate checking account, the LLC owns the houses, separate credit cards, etc.

IMO having this does not add complexity, it REDUCES it. It makes it very easy for me to know what spending was business related and what was personal.

Regarding only the LLC aspect, I think the below website describes it best. IMO providing protection for yourself is more related to running your business professionally than having an LLC. For example, keeping your units safe (smoke alarms, no mold, proper stairs/handrails, clean/no bugs), lease clauses that emphasize safety, doing high quality repairs, following laws such as ADA, FCRA, local ordinances, building codes, etc. will prevent accidents/injuries/lawsuits on the front end rather than dealing with them on the back end by having an LLC and lots of insurance. Therefore, I would focus my efforts on those things.

Now, given the above, the NEXT step in adding protection in my view would be an umbrella policy in the amount of your net worth. And then, to add even MORE protection, an LLC is appropriate. As far as multiple LLCs, it sounds good in practice but I'm not convinced it adds much in terms of protection.

Here is a good article:

www.munizzilaw.com/blog/when-can-a-member-of-an-llc-be-personally-liable-for-judgments-against-the-llc

Note the comments about judges typically only piercing the veil if they did something fraudulent, didn't follow corporate policies such as having annual meetings, and comingling assets...that is exactly what I was talking about above in terms of running your company professionally. Yes, you can run it professionally without an LLC...but having the LLC in my view adds another layer of protection.

I think it's great that you are at least thinking about this and asking questions...this is a good topic for us all.

Good luck!

Another comment generally about LLCs...

Let's say there are two landlords, call them A and B. Both have exactly the same properties, both have LLCs, properties are of the same value, same city, same everything...they run their businesses exactly the same EXCEPT FOR ONE THING...

Landlord A gets $1M in rent on the 30th each month directly deposited into his LLC checking account. His balance is therefore $1M on the 1st of each month. His monthly business expenses are $100,000.

Landlord B gets $1M in rent on the 30th of each month directly deposited into her LLC checking account. Her monthly business expenses are $100,000. HOWEVER, she withdraws $899,999 as an "owner's withdrawal" and deposits it into her personal bank account at 4:59 PM on the 30th so that her balance on the 1st of each month is $100,001....just enough to pay her expenses for the month and have $1 left over.

Then, on the 1st of the month, each landlord has a tenant file a lawsuit for $1M.

Does anyone on this forum really believe that Landlord B will be protected more than Landlord A because their business bank balance is lower? I say NO WAY!

John [MI] hit the nail on the head. As the Managing Member, I would be named personally in any lawsuit. I am ultimately the one who decided [not to replace the 50 year old flooring, not to reenforce the joists, or whatever]. I am personally responsible for the negligence that the Plaintiff is alleging. So everything I own in that particular LLC plus everything else I own is exposed. As long as the plaintiff's lawyer can find those assets. And a judgment debtor's examination would disclose those assets -- I am not a perjurer and would not lie about my ownership of other properties.

Better to have a great umbrella!

Just my .02... LLC is good at keeping your personal name off the public records. That's about it... have a good insurance policy. I have 14 unit personally in a LLC. My parents set up a FLP 20+ yrs ago. Better protection and easier to pass wealth down to the next generation.

If I were in your shoes I would have 80 land trust, with three or four LLCs each without much in assets as Trustees. I would then have a single Administrator acting as property manager for each property.

This provides you some asset protection (which coupled with umbrella coverage), some additional privacy, additional tax benefits (opens up the door for you to have a SOLO 401K) and the ability to make additional money by going around sub2 clauses.