Should real estate investors incorporate?

  @Money October 18, 2013: 4:18 PM ET
Why Chinese are buying U.S. real estate
NEW YORK (Money Magazine)

My husband and I own three investment properties. Should we incorporate? -- Demetra Cordova, Burke, Va.

The main reason to set up an entity like a corporation is to protect your personal assets against a lawsuit -- say, if someone gets injured on your property.

Instead of incorporating, though, Richmond real estate attorney Katja Hill suggests you set up a limited liability company, or several LLCs, to hold your properties.

LLCs are easier to maintain, she says, than the "S corp" corporate structure that's also used by small businesses.

Related: Finding financial planning professionals

A lender may make it hard for you, however, to move a mortgaged property to an LLC. A transfer might also trigger a tax hit (not likely in Virginia, but rules vary by area). In both cases, the best fallback for shielding assets is umbrella insurance. In fact, even with an LLC, Hill advises getting a policy to be extra safe.

Related: Was my home a good investment? To top of page

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