One worry of buy & hold real estate investors is getting sued. The sad reality is that anyone that owns real estate assets is a lawsuit magnet. There are a few people who make a profession out of going after anyone they perceive as wealthy. There are four steps to protecting yourself against this type of attack.
- Dont own property. At least dont own property in your name. Dont have multiple properties in any one company name. Hold the properties in trusts and other entities to protect your privacy. You are less likely to get sued if you dont appear to be sitting on ample assets.
- Run a reputable real-estate investing business. Pay attention to any health and safety issues. Use licensed contractors and pull building permits. If there is a problem, communicate and be professional.
- Carry ample liability insurance.
- Protect yourself by arranging your personal real-estate business appropriately. Separate the actions of your employees from your assets. Consider having a management company with your employees separate from your companies that own your properties.
Asset protection works in two directions: You want to protect your personal assets from actions against your business (investment) property. Conversely, you want to protect your business assets from actions against your person and personal property.
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