Combs: Single-asset LLC will provide best protection

Question: I recently inherited a small amount of money from my grandmother. I decided that I would use most of this money to buy investment homes at foreclosure sales.

I bought my first investment home at a foreclosure sale. I then formed a limited liability company, and I transferred the title to this investment home into the LLC to avoid personal liability.

In the next month, I plan on purchasing three more investment homes. Should I then transfer the title to these three investment homes into the already established LLC or should I have a separate LLC for each investment home?

Answer: You should have a separate single-asset LLC for each investment home. The reason is that, if one of the investment homes turns into a rotten apple, the other investment homes will not be affected. For example, if there is mold in one of the investment homes and the tenant and the tenant's family are injured by this mold, many insurance companies will not cover, or will severely restrict, mold claims.

The cost of forming an LLC is minimal in comparison to the potential liability, and after formation of the LLC, unlike corporations, there is generally no government involvement.

by Christopher Combs Combs Law Group Nov. 4, 2011 05:24 PM




Combs: Single-asset LLC will provide best protection