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Is Your Property In Your Name? – Big Mistake

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There are over 80 million lawsuits filed every year in the United States making real estate investors and landlords susceptible to major liability of being sued. How do you identify if you are an easy target for a lawsuit? Is your real estate titled in your name? If so, your assets may have a big bulls eye for attorneys.

Most real estate records are now online, so with a quick search on Google or Yahoo all of your real estate holdings can be located at the touch of a button. With today's ability to find and identify individuals' property it is increasingly more important to have your most valuable assets protected.

Furthermore, on the same sites that you can identify an individual's holdings you can find their mortgages and the original principal balance at the time of sale. By subtracting the mortgage from the current market value of their property you can quickly get a rough idea of how much equity they have and whether they are worth suing.

So although building equity, value accumulated by market value increase, can be a real estate investor's best friend it also creates new liabilities risks that need to be addressed.
Another problem of having property in your name is if a judgment is obtained against you, the judgment may act as a lien on the property. If the judgment lien is filed in the county in which you own property, all of the real estate in that county will have a lien attached to it. If a property has a lien, you may not sell or refinance that property until the lien is satisfied. Your only choice as owner of the property will be to pay off the lien.

Real estate investors have probably heard about holding properties in a limited liability company (LLC) but aren't sure about the details of doing so. In order to protect their assets from a lawsuit, investors often choose to hold their real estate in LLCs. Owning property in a Limited liability Company provides greater asset protection than ownership in an individual name and greater flexibility that owing property by a corporation.

If a Creditor gets a judgment lien against you, your LLC can still sell the property. Additionally, real estate investors should have a separate LLC for each property they own to spread the risk. This ensures that one property's liability will not affect another.

LLC's provide additional flexibility in asset protection as they are not limited to owning real estate and can be used to buy and sell stocks and bonds and own other financial instruments. An LLC can borrow and lend money. Because LLC's are considered pass-through entities by the IRS all the earnings pass through to the owners. If the LLC has only one member, the IRS disregards the LLC as a taxable entity. A single member LLC is not required to file federal taxes.

Because every situation is unique, you should always discuss your needs and goals with a professional real estate or LLC attorney such as the attorneys at LegalCreation, because your rights are worth protecting. 

Kevin Pratt is Attorney in Law in Georgia and focuses his practice in business law, corporations and limited liability companies, real estate transactions, tax deferred like-kind property exchanges, secured lending, and real estate litigation. Kevin Pratt has assisted hundreds of entrepreneurs in the creation of business entities such as Corporations, Limited Liability Companies, or Partnerships to facilitate their particular needs regarding, taxation, financing and limited personal liability. For more information please visit www.LegalCreation.com

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