Francis St. Holder: Asset Protection for Real Estate Investors
Francis St. Holder has an interest in real estate development, and this can be a very lucrative area for investors. When you put capital into something tangible like an apartment building or a shopping center, you can collect rent from tenants, but you retain ownership of the structure. You are building equity at every turn, but it isn't costing you anything,
because the renters are paying your mortgage. Ideally, there will be positive income after the bills are paid, and this is the scenario that savvy investors aim toward. If everything goes according to plan, your lender will gain confidence in you, and you can build capital that you can put into another piece of rental property.
Real estate investing can be the right choice for many people, but you have to take liability into account. As they say, we live in a litigious society, and there are always people out there who are not shy about filing lawsuits. Plus, honest individuals who are not overtly looking to sue anyone are sometimes victimized through no fault of their own. When you own property and you rent it out, your tenants, their visitors, and customers who are patronizing commercial spaces could potentially get injured on your property. If you do not take the right steps in advance, you could be held personally liable. This is a reality that a knowledgeable businessperson like Francis St. Holder would naturally take into account.
There are business structures that you can utilize for asset protection purposes, and one of them is the family limited partnership. As the name would imply, when you create this type of partnership, you bring family members into the fold. They would be the limited partners, and you would be the general partner. The limited partners would have no decision-making authority, because a family limited partnership is not a democracy. You as the general partner would be the sole decision-maker.
To explain the asset protection benefits by way of example, let's say that you own an apartment building. You could convey the building into a family limited partnership that you establish. If someone is injured in the apartment building, and a lawsuit is initiated, the personal property of the partners would be protected. The only assets in play would be assets that have been conveyed into the family limited partnership. On the other side of the coin, if a member of the partnership was to be sued for any reason, property that is held by the partnership would be protected. If you owned multiple different rental properties, you could convey each one into a separate family limited partnership to obtain maximum asset protection. This is one legal structure that can be useful for business minded individuals like Francis St. Holder, but there are others.