Quote Originally Posted by fidgiegirl View Post
@jenipurr, if you are reading, I have been thinking of you often in the last few weeks. How are you (most importantly) and your rentals recovering from the tornadoes?
Hey Fidgie! somehow I missed this. Everything here in the recovery has been hard...we were so fortunate to have little damage. Two of our rentals are very close (one neighborhood over had houses destroyed) but luckily they both suffered minimal damage. They are both condos though, so I am worried about the assessment...there is some damage to the property, trees, roofs, etc...and then we had to have private security for several weeks due to looting, ugh...so I am fearing an assessment for that. One unit had a mystery 2x4 shatter a window, and the other was fine. They are both short term furnished rentals so we were able to get a guy from FEMA and an insurance adjuster in there pretty quickly. Completely seperate from the storm, one of them was rented entirely through our peak season (football season) but the people renting it had to cancel due to a tragedy in the family. So, that was hard emotionally and also is going to be hard financially because we have to get on the ball renting it now. Luckily, we got a bit of an escape and heading to a friend's destination wedding for a week, so I am relaxed and ready to dig in.

Re your post...there are all sorts of accounting rules. Phantom losses, depreciation, all that stuff. And its all changed about 3 times in the past 10 years regarding personal/rental how long you have to hold it, rules, etc. It would probably be best to find a good book on it and/or a good accountant and also be prepared to have things change on the tax end. You DEFINITELY need to have an account specifically for the rentals, especially if you do end up setting them up as their own corporation. I think they call that Piercing the Veil. We do all transactions related to rentals on separate receipts, accounts, etc.

Except for one we own outright, ours our mortgaged in our own name so a lawyer friend was really iffy on if deeding them to an LLC would even accomplish anything except more paperwork since the limited liability would probably not be valid. So, we just stuck with keeping them in our names and doing the schedule e on the IRS form. We bought an umbrella policy and properly insured all the rentals so we're banking on that. At a point when we do not have them mortgaged and we do have a significant portion of wealth in them, I have read it is best to put each property in its own LLC, so that way all the others are protected if something happens at one.

Your $5000 cushion is probably ok. There could potentially be a lot more damage, and you also need to account for paying the bills when the place is vacant, but if you properly screen your tenants and know the ages of your big expenses (roof, hvac) then probably not. Good luck!