The suicide squeeze is one of the most exciting plays in baseball.

It happens when there’s a runner on third who takes off toward home when the pitcher starts his motion, expecting the batter to make some sort of contact with the ball and put it in play, thus scoring a run.

Except for trying to steal home outright it’s also the riskiest play in baseball.

I was with a couple of buddies this afternoon smoking cigars and talking shop. We got on the subject of rental houses, and since one of them is a lawyer, we talked at length about how many LLCs I use with my rentals and how I learned to use them properly.

He then told me about a couple of his colleagues that have free-and-clear rental houses. They’re building up portfolios, and his understanding is that neither of them use LLCs at all, as they were simply holding the properties in their own names.

That’s just about the riskiest play in landlording.

Which is why I call doing that it the Landlord Suicide Squeeze.

Why? Because when you do that you’re betting your entire personal balance sheet on black.

Every single day.

All it takes is one slip and fall or one “accident” at one of your properties and you could be committing personal financial Hara-Kiri.

Now I know the folks he was referring to, and they’re both really smart people. Which reinforces to me the fact that proper use of entities isn’t common knowledge.

So I want to use this space to review the reasons why using entities is important when you have rentals.

One caveat – my friend is a lawyer, I’m not. So I’m not giving you legal advice. If you have questions, talk to a local attorney with real estate entity experience.

Here are three items to keep in mind:

I have to say that one of my biggest fears about being a rental property owner is running into a “Professional Tenant”.

A “Professional Tenant” is a someone who knows the rental laws cold, knows the system, and therefore knows how to work the system” by taking advantage of pieces of the law to live rent free. Sometimes indefinitely.

They can cost you several months of rent and thousands of dollars in legal fees before you win. And they’re generally not collectable so while you’ll eventually get your house back the judgment will be worthless.

I’ve mitigated that risk somewhat by buying and owning properties in the best school districts, so I generally have no less than ten good quality applicants to choose from when I have a vacancy. So I can reject an applicant that doesn’t look right on paper.

And to date I haven’t ever rented to one. But my fear is still there.

I bring this up because I just read a great piece on the topic and I wanted to share it with you.

It’s called ‘Professional Tenants’ and How Not to Fall Victim to Them, and it was written by Richard D. Vetstein, Esq.. A link to the article is below.