If you get sued, you want to make sure that your properties are protected. If you are a real estate investor, you probably do not want to place multiple properties into the same LLC. If you do, each one of those properties becomes exposed to risks and liabilities. As they say, you do not want to put all of your eggs in one basket. The knowledgeable and experienced investor recognizes this risk and instead will want to only place one property into each LLC. This will ensure that any liability associated with a property will stay contained in the one LLC. You do not want to risk other investments. Some people still like to group properties together. It is a question of risk verses convenience. Why do people do this? Sometimes it is because they feel that by putting multiple properties into LLCs, it would lower various costs and maybe make it easier to handle banking and finances. What are your business formation options?
People sometimes create Series LLCs in an effort to save costs, but there are occasional downsides to this. This may include confusing banks and the additional work load for creating compliant internal documents. Some clients like to put 2-3 properties per LLC. The conservative investor will only allow one property per LLC. The author has seen many investors and builders open several LLCs because of the liability factor. Accidents happen and so do lawsuits. As attorneys, we look for the assets of a liable company in order to potentially collect on a judgment. When an LLC has limited assets, it is discouraging for the suing party to sometimes continue suit. It often encourages settlement. Why do these real estate investment companies teach their students to group properties together? Maybe because these so-called teachers are not lawyers. These seminar companies hand out contracts to their students that were drafted in states outside of Texas. If you are in Texas, use a Texas contract drafted by a Texas lawyer.
If you challenge these real estate seminar “teachers”, I bet they will not have a good answer for the advice that they give. Why is that? Maybe because they are not lawyers licensed in your state. We are Texas real estate lawyers and we want you to get the right advice from attorneys in Texas, not some so-called real estate guru from a non-Texas state. You can reach us at 713-572-4900