Renters Liability in Case of Liability Claims for Property Damage or Fire
"The truth is anyone can sue anyone for anything.  So yes you could be sued, but the more important part to measure is the probability of success.   While this is probably more of a legal stack exchange question, in order for a successful suit there has to be proven at least some negligence on your part in the situation you cite.  The very fact that the landlord is not willing to turn on the heat is probably enough to absolve you from any liability.  Once you go down to a local store and purchase a UL certified heater then a suit would have a very low probability of success.   Perhaps a case could be made if you made your own heater and it burned down the house.  But that would require finding a jury that is sympathetic to landlords that will not provide heat for their tenants (highly unlikely). Could the landlord sue the heater company?  Yes and would likely receive an out of court settlement.   Even in the case that liability can be proven on your part, it is very unlikely you would be targeted.  These type of suits target ""deep pockets"" or those with wealth.  Unless something is specifically known about you having a high level of net worth a civil suit will not be brought against a ""room renter"" because of the lack of funds.  People in your demographic tend not to have a lot of money.  (No offense intended, I was there myself once.)  In the case that you do have a high net worth, then get renters insurance and possibly an umbrella policy.  It is a small price to pay to protect a significant amount of assets.   If I was in your shoes here is what I would do:" "According to US News, renter's insurance does cover liability as well as your own belongings.  They list this as one of four ""myths"" often promulgated about renter's insurance.  This is backed up by esurance.com, which explicitly mentions ""Property damage to others"" as covered.  Nationwide Insurance says that renter's insurance covers ""Personal liability insurance for renters"" and ""Personal umbrella liability insurance"".  Those were the first three working links for ""what does renters insurance cover"" on Google.   In short, while it is possible that you currently have a different kind of coverage, this is not a limitation of renter's insurance per se.  It could be a limitation in your current coverage.  You may be able to simply change your coverage with your current provider.  Or switch providers.  Or you may already be covered.   Note that renter's insurance does not cover the building against general damage, e.g. tornado or a fire spreading from an adjacent building.  It is specific to covering things that you caused.  This may be the cause of the confusion, as some sources say that it doesn't cover anything in the building.  That's generally not true.  It usually covers all your liability except for specific exceptions (e.g. waterbed insurance is often extra)."
"You should really be talking to a tax adviser (EA/CPA licensed in your State) about taxes and to a lawyer about the liability protection. You won't find answers from neither of theses here. Besides the liability protection, how do these 2 options affect taxes? There's no liability protection difference between the two (talk to a lawyer to verify) since you'll be cosigning them personally either way. In the first case (loan to the LLC) - everything goes on the 1065 and you get the bottom line on K-1 which transfers to you own tax return. In the second case the loan interest is your personal investment expense (Schedule A deduction) while the loan proceeds you moved to the LLC add to your basis. I'd suggest getting the loan directly in the LLC name, if you can. However, the Lawyers seem to agree that this would void the mortgage   because of the ""Due on Sale"" clause in mortgage loans. ""Due on sale"" may or may not be invoked, but that's a risk you'd be taking, yes. LLC is a separate legal entity (as opposed to a living trust, to which your second quote seems to be referring), so it is definitely a possibility for a lender to call on the loan if you re-title it." Regarding auto insurance, you have to look at the different parts. In the United Sates most states do require a level of specific coverage for all drivers. That is to make sure that if you are at fault there is money available to pay the victims. That payment may be for damage to their car or other property, but it also covers medical costs. Many policies also cover you if the other driver doesn't have insurance. The policy that covers the loss of the vehicle is required if you have a loan or are leasing the car. Somebody else owns it while there is a loan, so they can and do require you to pay to protect the vehicle.  If there i no loan you don't have to have that portion of a policy. Other parts such as towing, roadside assistance, and rental cars replacement may be required by the insurance standards for your state, or might be almost impossible to drop because all insurance companies include it to stay competitive with their competition.  Dropping the non-required parts of the coverage is acceptable when you don't have a loan. Some people do drop it to save money. But that does mean you are self insuring. If you can afford to self insure a new car, great. The interesting thing is that some people have more than enough assets to self inure the non-required part of auto insurance. But then they realize that they do need to up their umbrella liability insurance. This is to protect them from somebody deciding that their resources make them a tempting target when they are involved in a collision. "That's because Ford - like many other managers of large defined benefit plans - decided that, instead of defeasing its obligations through an [effective immunization program](http://en.wikipedia.org/wiki/Immunization_%28finance%29), they would just put less money into equities and pray for the equity risk premium to carry the day for them.  Lo and behold, it didn't work for a lot of them.  In the meantime, their liabilities began to far outstrip the assets meant to offset them to the point where even a one-for-one asset-liability match wouldn't help.  So now guess what?  They tell you ""shit, we fucked this up, so here's your payout - good luck.""  As if the worker is going to have a clue as to how to effectively manage his money so as to minimize longevity and savings risk.  Let me make something clear:  It is not beyond the means of modern finance to effectively implement and administer a defined benefit program.  It involves ""doing the right thing"" by employees, which in some cases involves not taking risks with equity and instead simply ensuring that assets meant to offset liabilities are appropriate in both timing and magnitude." To your secondary question: Appropriately consider all estimated numbers involved with keeping the house compared to your closest estimate of what the home could sell for. Weigh out the pros and cons yourself as a stranger will not be able to 100% appreciate what you value and dislike.  Remember to include insurances, taxes, HOA(s), and the actual mortgage payment. Depending on how you also plan to rent out the property, include whichever utilities you intend to cover (if any).  There will also be costs for property management and upkeep as things will break overtime and tenants will not hesitate to get you (or your management) to fix them, either way that means you are paying. I would also keep in mind while homes typically appreciate in value there is a higher risk with tenants for the value to depreciate to damages and poor upkeep.  There are increased legal risks to renting, so be sure you have properly vetted whichever management you are going with.  In extreme circumstances you also could be required to retain an attorney to defend yourself again litigation because whichever management team you hire will most likely defend themselves and not include you in that umbrella.  My family lives in the LA area as well and a judge refused to throw out an obvious frivolous suit when my parents attempted to rent out a house.  The possible renters after signing the main paperwork never showed to finish a second set of documents for renting.  Parents immediately declined to rent to these people as they missed something so important without any explanation and they sued claiming racism, emotional damages, and some other really crazy things despite my parents never having met them (first meeting was between property management and renters only). Personally and professionally, I would only suggest renting our the place and not selling if you can turn a profit after all the above mentioned costs. If renters are only paying to keep the property in the black you have yourself a non-earning asset which WILL be damaged over time and require repairs which will come out of your pocket.  Also, while the property is unoccupied you also must remember it is not earning at that time. Much of this may sound obvious, overcautious, etc... I simply wish to provide my family's experience to help you in making your decisions.   Best of luck with your endeavor. Edit:  Also, you will be required to report all earned rental income on your taxes. They will fall under the Schedule E and possibly K-1 area.  I would strongly recommend consulting with an actual accountant about the impacts to you. Don't forget the risk of not finding tenants and having your property be empty. Or having bad tenants who destroy the place. Or just spending all your time  (because time is money) on general upkeep/maintenance (or, if you subcontract that out, making sure a decent job was done) An article linked from cnn.com has some great advice, which I think are good rules of thumb. Also, at least my insurance gives a premium price for those who haven't filed a claim in 5 or more years for homeowners or rental insurance. See if you have a similar discount, will loose it, and guess how much that will cost you over 5 years. My rule of thumb: Your premium might go up quite a bit, possibly as much as triple, especially for a large claim. But, it is certainly worth it if you are going to get more than triple your premium through your claim. The worst case: Mortgage mandated insurance, which will be about triple your current cost. To your secondary question: Appropriately consider all estimated numbers involved with keeping the house compared to your closest estimate of what the home could sell for. Weigh out the pros and cons yourself as a stranger will not be able to 100% appreciate what you value and dislike.  Remember to include insurances, taxes, HOA(s), and the actual mortgage payment. Depending on how you also plan to rent out the property, include whichever utilities you intend to cover (if any).  There will also be costs for property management and upkeep as things will break overtime and tenants will not hesitate to get you (or your management) to fix them, either way that means you are paying. I would also keep in mind while homes typically appreciate in value there is a higher risk with tenants for the value to depreciate to damages and poor upkeep.  There are increased legal risks to renting, so be sure you have properly vetted whichever management you are going with.  In extreme circumstances you also could be required to retain an attorney to defend yourself again litigation because whichever management team you hire will most likely defend themselves and not include you in that umbrella.  My family lives in the LA area as well and a judge refused to throw out an obvious frivolous suit when my parents attempted to rent out a house.  The possible renters after signing the main paperwork never showed to finish a second set of documents for renting.  Parents immediately declined to rent to these people as they missed something so important without any explanation and they sued claiming racism, emotional damages, and some other really crazy things despite my parents never having met them (first meeting was between property management and renters only). Personally and professionally, I would only suggest renting our the place and not selling if you can turn a profit after all the above mentioned costs. If renters are only paying to keep the property in the black you have yourself a non-earning asset which WILL be damaged over time and require repairs which will come out of your pocket.  Also, while the property is unoccupied you also must remember it is not earning at that time. Much of this may sound obvious, overcautious, etc... I simply wish to provide my family's experience to help you in making your decisions.   Best of luck with your endeavor. Edit:  Also, you will be required to report all earned rental income on your taxes. They will fall under the Schedule E and possibly K-1 area.  I would strongly recommend consulting with an actual accountant about the impacts to you. Definitely will be appealed several times throughout the litigation, but if it gets through a jury trial, the jury gets a lot of deference on what they determine damages are. As long as they aren't too ridiculous, higher courts will uphold big payouts.