Real estate is one of an individual or business’s most valuable assets. This makes it a prime target for most creditors when pursuing a claim or filing a lawsuit against an individual.
Therefore, protecting your real estate assets should be a top priority. But, how can you do so?
Here is all you need to know about real estate assets and how you can ensure creditors, lawsuits, and other risks don’t take them away from you.
Why Do I Need Real Estate Asset Protection?
Real estate asset protection is a strategy used by investors to protect their properties against creditors and lawsuits. Furthermore, if properly created it will also protect you from your tenants. For instance, if you’re using your real estate for business and a tenant gets injured on the property, they may decide to sue.
Typically, the settlement amount for damages is significant, putting a massive strain on you and your business.
A real estate asset protection plan limits the assets you’ll be forced to liquidate to pay for the judgment or settlement.
Strategies You Can Use to Protect Your Real Estate Assets
There are several strategies you can employ to protect your real estate assets. They include:
Set Up an LLC To Hold Your Real Estate
Instead of holding the title to your real estate individually, set up a legal entity to hold the real estate, detaching it from your personal assets.
The best legal entity to set up is a limited liability company (LLC). If a creditor sues you, they can’t access any of your properties since the LLC is the legal holder.
Get Insurance
Insurance is one of the most common asset protection measures in real estate. The kind of real estate you own determines the type of coverage you can have. A typical homeowner’s policy will protect your house, while a business policy will protect your commercial property from lawsuits and claims.
Use an Anonymous Land Trust
An anonymous land trust is an excellent tool for protecting your real estate assets with an extra layer of anonymity. When working with an anonymous land trust, you can avoid having your name on record, meaning lawyers will not be able to link you with any of your properties in the trust during litigation.
Using Debt Strategically
Strategically using debt, also known as equity stripping, is an excellent way of protecting your real estate assets. For instance, if you have a rental property worth $100,000, you have $100,000 in equity that can be a target for the plaintiff’s lawyer.
If you strip equity out of the property and maintain a loan-to-value ratio of 75%, the potential cash at risk is $25,000. This little equity may deter a creditor or attorney.
Learn Other Ways You Can Protect Your Real Estate
There are various approaches you can use for real estate asset protection. Read more about The Second Estate asset protection and learn how we can help you secure your property, such as by using our Copywritten 643 Trust or by buying property using an IGIC.