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How to Legally Protect Your Real Estate Property

— January 3, 2022

Protecting your real estate is all about knowing the law. The more you understand it, the more you’re able to use it to your advantage.

Owning real estate is one of the surest ways you can build wealth. But, you’ve got to protect your assets. Otherwise, something could happen to them. Protecting your real estate isn’t too hard, thankfully. We’ve put together a few ways you can protect yours below.

  • Set Up a 1031 Trust Exchange

Investing in a Delaware statutory trust is a useful way to exchange real estate. By using one of them, you’re able to avoid capital gains tax. That means you’ll have more in your pocket at the end of the transaction. Setting up a DST isn’t something that takes a long time, either. You’ve just got to speak with someone who knows what they’re doing. They’ll be able to set one up for you within a couple of days. Using a DST lets you exchange property without paying capital gains tax. You’re only able to exchange property for something similar. It can’t be something that’s way more valuable than what you’re trading. But, if you’re moving to a new state, you could use it to purchase a new home. All the equity you’ve built should transfer to the new one.

  • Create a Living Will

We never know what life has in store for us. That’s why it’s important to plan for anything that could happen. Part of this would be creating a living will. Putting a living will together protects your assets in the event of your death. You’d want to know where everything will go if that ever happens. Speak to an attorney to figure out what you’ll need to make one. They’re pretty simple documents, usually. So, making one isn’t going to take all that long, either.

  • Hold It in an LLC

Limited liability corporations perform some very important services in our economy. One of the biggest things they do is protect people from liability. If you’ve got a lot of real estate property, you might want to set up a holding company. Holding all your real estate in an LLC would limit your personal liability. If something happens to one of them, all the liability would fall on the corporation. Then, you wouldn’t have to worry about it affecting your personal life. Each state has different laws regarding LLCs. Most of the time, they’re fairly simple to register. You’ve just got to submit the proper documents to the relevant authorities. Then, they’ll send you everything you’ll need to operate the LLC.

  • Always Make Sure the Title Is Clear

When you’re buying a new property, always perform a title search. Typically, your realtor will perform one of them for you. But, it’s not a bad idea to do it yourself. Look for any liens against the property. That would prevent you from legally owning it. Sometimes, people try to sell properties with liens on them. That’s a way for them to get away from the responsibility. You can protect yourself from that by simply performing a title search. Don’t finalize the transaction unless the title is completely clear.

Photo by Gus Ruballo on Unsplash.
  • Homestead Exemptions Could Help

Declaring bankruptcy could help you get a fresh start. It would eliminate all your outstanding debts, leaving you with a blank credit report. However, you’ve got to think about your home equity before declaring bankruptcy. Some states don’t let you keep the equity you’ve built. However, you can find a way around these laws by filing a homestead exemption. It’ll let you hold onto all your equity after filing bankruptcy.

  • You Can Minimize Your Equity

If you’ve got creditors pursuing you, then you might want to load up on debt. Creditors love going after homes with lots of equity. But, they’re not as fond of homes with lots of leverage. Taking out another mortgage could make your property less attractive to creditors. When the LTV is too high, you’ll be the only one interested in it.

Protecting Your Real Estate Property

Protecting your real estate is all about knowing the law. The more you understand it, the more you’re able to use it to your advantage. Learning how the law works can make it easy to protect your property. Even beginners can figure it out with a little research.

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