Investing in real estate is a solid financial choice. If you purchase the right properties, your investment can create good returns, a consistent cash flow, and a sense of pride. You should take the time to plan to protect your real estate assets by minimizing risks.
Separate From Personal Finances
In order you protect yourself, you should separate your real estate investments from your personal assets. One way to do this is to set up an LLC to purchase your real estate investments. Owning your assets through an LLC can protect you from personal liability from lawsuits. Another way to seperate your assets from your finances is to set up an anonymous land trust. A trust is made up of a grantor, beneficiary, and trustee. The name of the trustee does not need to be published, which protects you and your personal finances. A benefit of land trusts is that it is easier to transfer property through a trust than an LLC.
One of the most important ways to protect your real estate assets is through homeowners insurance. This type of insurance covers the physical envelope of your home from damage to the roof, walls, and doors. The cost of homeowners insurance is minor compared to the cost of major repairs. Homeowners insurance can also protect the personal assets inside of your home. This means you can be reimbursed if items are stolen. Be sure to inventory your belongings so that you are able to make claims on them in the event they are stolen.
Consider Debt Protection
Another choice you have to protect your real estate investments is debt. If you have debt on a property there is less equity, which can keep creditors from trying to purchase it from you. Having a lot of equity on a property attracts creditors so any equity you acquire should be reinvested. If you do have a lawsuit filed against your property, the equity can be stripped out to protect your existing loans and loan proceeds. This will help protect your personal finances from costly legal proceedings.
Investing in real estate can be a major benefit to you financially. Like anything that is valuable, you need to make sure you are doing everything possible to protect these assets. Figure out what strategies work best for you and your assets to keep your personal finances protected.
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