“When I was your age, we actually had this thing called privacy!”
Is privacy dead? Long live privacy? I’ll let the politicians and data pirates debate that point, but here’s what I do know: landlords and real estate investors are juicy targets for lawsuits, so they should care more about privacy than most people.
That doesn’t mean you have to go full-weirdo with a fenced-in compound and a small arsenal of semi-legal assault weapons. Or live off the grid, grow a gnarly beard, or become a paranoid schizophrenic. You can keep on keeping on, but it’s worth considering a few ways to make yourself a less obvious target.
Here are a few things you should definitely do, a few worth considering, and a few that might land you on an FBI database.
P.O. Box: You don’t want your tenants knowing your home address. Why? Because they might show up, wielding a chainsaw or interrupting your fancy dinner party halfway through the cheese course.
Post office boxes are cheap and worth the extra layer of distance. You can get one for less than $10/month, and use it to receive mail from all kinds of other people you’d rather avoid giving your home address to (e.g. online supplement sellers, Jehovah’s Witnesses, meathead gym membership salesmen). There are even private mailbox services that will sign for your packages, or scan and email your mail to you.
Social Media Settings: Ideally your social media accounts should be set so that only your friends and followers can see your information and posts. But it’s also critical that you not friend your tenants on your personal social media accounts (if you have a business account, that’s different). People already think of landlords as living large like the 1%-ers, so the last thing you want to do is encourage your tenants to think of you that way by letting them see pictures from your latest vacation (or that fancy dinner party with the cheese course).
Call Forwarding: Don’t want to give out your personal phone number to tenants? Good. Use Google Voice or another inexpensive service to give you a second number that you can just set to forward to your mobile phone.
LLC Ownership: This is one of those old questions that people have argued about since time immemorial, like “Is Spam actual meat?” and “Why was Wham so popular in the ‘80s?”. This is fodder for several nerdy legal debates, but the gist is that some landlords create limited liability companies (LLCs) to hold title to their rental properties, with the hope that if a rental-related lawsuit comes along, the worst that can happen is the plaintiff takes the property and not attack all of the landlord’s personal assets. The other benefit is some degree of anonymity: the landlord does not have to tell the tenant that they are the owner, they can just say they work for the LLC (or some such).
The problem is that in most states, the principal’s name is still a matter of public record along with the LLC. So, when an ambulance-chasing attorney looks up the LLC, they see your name right there, and just list you as a defendant in the lawsuit along with the LLC itself. The bottom line: talk to an attorney if you think LLCs might be a good idea for your rental properties (but don’t actually pay them to create the LLC – you can do it yourself very cheaply and easily). Delaware and Nevada are good places to start looking for more privacy-friendly LLC laws, hint hint.
Separate Bank Accounts: If you do own your properties through an LLC (or three), be sure to set up separate bank accounts for each LLC, and don’t commingle the funds. This will help showcase that the LLC really is its own entity, and only the LLC should be considered as liable (not you personally) if there happens to be a lawsuit.
Property Managers: Property managers add another layer between the landlord and tenant, and assume some legal liability for the way the property is managed. But property managers typically charge 8-10% of collected rents, and of course they do a lot of other work for you as well, from tenant screening to signing lease agreements to collecting rent and handling evictions. If hiring a property manager makes sense within your investing model and property finances, then go for it, but don’t hire them solely for privacy reasons.
Overseas Shell Corporations: There’s been a lot of talk about these in the recent Panama Papers scandal, but if you own so many rental units that you need to go this big, be sure to talk to an attorney. Give us a call from Panama or prison to let us know how it went.
Irrevocable Trusts: The theory goes like this: you assign ownership of your assets to a trust, which has someone else as the beneficiary (usually your spouse or adult child). If a tenant or someone else sues you, they can’t take your assets, because they’re not “yours” per se, but rather belong to someone else. There are a few problems with this however. First, you’re getting pretty technical with complex laws, which means high attorney fees and uncertain outcomes in real life. Second, you’re literally giving away your assets (albeit in a way you can probably still control). Third, if the beneficiary dies or becomes incapacitated before you, you’re in trouble.
More privacy is better for landlords, but there are of course practical limits. If you can avoid giving tenants your name, real address and real phone number, you’re in good shape. Use aliases, nicknames, employees and agents when practical, but don’t get too “cute,” or you’ll spin yourself into a web you can’t easily escape (or remember, for that matter).♦
How do you protect your privacy? Had any bad encounters with renters or attorneys, that made you wish your privacy was better held?