Thread: Insurance

I've got a couple questions about some insurance...I'll present a scenario that might better explain my question.

Real estate portfolio consists of 15+ residential properties, 7 to 8 of which are adjoining (one square block). The other 8 or so are in a different location a few miles away. In Florida, adjoining properties warrant a commercial insurance policy. This of course is a lot more costly than a typical individual residential policy. This is also only in effect if all of the above properties are held in the same name (ownership).

My questions is this.

If these properties are being held by an individual, there are obvious advantages for protection/taxes by holding them in an LLC, right? If an LLC were formed to buy and hold, all properties would immediately be viewed as one entity. This would also call for a commercial policy that is triple the current insurance cost. The issue at hand is the advantages will cost more in insurance than they are worth, due to mandatory laws. It seems like it might be best to open several entities to hold the properties in small groups. The numbers just don't make sense, i.e. it might cause 15 cashflowing properties to come up negative for many years. Some may say they were bought wrong. I don't agree with that, as insurance rates in Florida have gone nuts due to hurricanes, not insufficient due dilligence on buying right.

Ideas on how to best deal with this situation? It seems like I'm missing something here. If this is to vague, I can provide more details, I was just trying to make it short.

What are the costs for entities where you are? In CA, an LLC will run you a minimum of $500 a year. Not sure about FL, but those costs combined with creation costs will probably put the expense of seperate entities above the expense of a commercial insurance.

You might have to bite the bullet and not cut corners. I am all for saving a buck, but insurance is one of those things where you get what you pay for.

Good luck.