If you have decided to join the real estate, asset protection is vital. Just like most industries, real estate investments have their shortcomings. This necessitates the adoption of different asset protection strategies.
Here are simple steps to protect your assets and ensure their value.
1. Funding
In most cases, real estate development requires outside funding. It is not realistic to only develop properties that you can fund on your own. Therefore, you will need to get funds from other sources to pay for construction costs and other related expenses. According to NewSilver.com, acquiring traditional loans is a slow and exhausting process. Investors should get money for specific projects to avoid wasting money on other areas. For instance, fix and flip loans are for investors who want to renovate and resell the property.
Acquiring funds from other sources may bring you more troubles if not well managed. To secure funding, the investor must demonstrate the ability to accomplish the goals of the project.
2. Insurance
This is the number one asset protection methods in the real estate industry. There are several types of insurance available for real estate property. The insurance cover you take depends on the type of real estate investment. You may protect your commercial property with business policy and increase your insurance coverage as the property enlarges. Ultimately, you may consider comprehensive coverage.
Insuring your investment protects you against several catastrophic events. An insurance professional can help you calculate the possible exposure for your property and the type of insurance it needs. Shopping for the right insurance isn’t a walk in the park. That’s why experts often that you shop around for the companies around you before settling for one.
3. Anonymous land trust
Anonymous land trusts will help you avoid legal complications that may arise on your real estate property. Therefore, anonymity is a protection strategy you will want to consider. The trust has a trustee, beneficiary, and grantor. You do not have to put your name on the records. In case you are caught up in a lawsuit, the court cannot connect your trust to your real estate property.
4. Limited liability
Registering your property as a limited liability can protect your assets from lawsuits. Debtors cannot come to claim property registered as an LLC. Nowadays, people are buying a house and then register it as an LLC to reduce financial risks. Forming an LLC offers many benefits, among them eliminating the chances of personal asset seizure by debtors. It would be best if you were careful about asset transfers to prevent charges on fraudulent practices. Having real estate investments in different names will help diversify the risks when you are faced with lawsuits.
5. Titling
Titling your house is an excellent protection strategy. Having your partner as an equal tenant gives you an added advantage. If your partner is facing a lawsuit, creditors cannot claim your property because you have an interest. You should note that some states do not allow titling exceptions. Talk to your agent to learn about the provisions in your state. You may need complementary strategies to protect your house.
6. Avoid risky situations
Risk is almost inevitable in real estate investments. However, it is not worthy of risking your valuable assets in avoidable situations. It would be best if you were careful when engaging in deals and signing contracts. This should not mean that you slow down your investment pace. Instead, carry on with due diligence at all times. The last thing you want is dealing with a lawsuit because your contractor used inferior quality roofing materials. When it comes to contracts, read through the agreements before signing. Consult with your lawyers on the best course of action. This way, you are less likely to face lawsuits.
7. Protection through debt
This is the most affordable protection for your real estate investments. With debt, there is low equity, which might discourage debtors from coming after your property. If you are in the real estate industry, debt protection is a method you don’t want to ignore. Keep sourcing all the equity from your property and reinvest the interests in other projects. Debt protection ensures you do not have excess equity that attracts creditors. Also, loans are tax-free, which means more savings for you.
As lucrative as they sound, real estate investments present challenges that lower the value of your property. The real estate market depends on factors such as job growth, economic conditions, and interest rates. Since you do not know when the catastrophe will strike, it’s better to arm yourself beforehand. For maximum protection, you can combine several protection strategies.
