A properly structured real estate portfolio means having your assets arranged in a way that each property is it's own entity, apart from you personally, as well as all other assets that you own. Here are some basic tips for present or future real estate investors who are looking for asset protection 101.
1. Each property should be owned by a different entity.
The entities that own each property can be various things, from a landtrust to a corporation like an LLC or S-Corp. A landtrust is what we recommend for our purposes, but there are different benefits for corporations versus landtrusts, so for your individual needs, we recommend giving us, or your real estate professional of choice, a call to discuss your specific situation.
2. Insurance!
Just because you're using asset protection strategies, don't discount insurance. All property owners should have insurance coverage, but it's the "last resort" safety net for asset protection. If all else fails, your insurance plan should at least take the majority of the impact. If you have a lot of assets, then you have a lot to lose. It's better to be over-insured than to lose 50% of your wealth due to an unavoidable circumstance or accident.
3. Each property should have it's own bank account.
Since you will have each of your properties under a different entity, each one of those entities should have it's own bank account. Rental funds get deposited there, repairs/maintenance/costs come out of it, and you can even pay yourself a monthly salary with it. Leave some in there though; you never know when plumbing emergencies/roof leaks/AC repairs will happen. It's important that these accounts are seperate from the others - not all linked to one account. Legally, that can be called co-mingling funds, which is a big DON'T in the business world.