Having Issue getting cash out due to title in business name

Having Issue getting cash out due to title in business name

Investor · Tampa, FL · Member since 2015 · 103 posts · 29 votes

Hi, in 2015 I bought a rental property for 50k cash under a business LLC name I had created. My strategy originally was going to be, purchase the property 100% equity, than get a first mortgage on that property to cash out and thus have enough capitol to buy another property.

This is were the problem occurs. Because the business is new, and only has income from that one rental property, banks are not willing to do a commercial loan. They are also not able to do a personal loan on the property because the title is in my business name and all of my income is from my day job. One bank had suggested also adding my name onto the title of the property so the title would have both the business name and my name. It would also have to season on the title for 6 months. 

Question is, do I assume more risk on the property by adding my name to the title, if I were to get sued for example? If this is the case and I must add my name to the title than my creating this LLC was pretty much a waste.

Any advice would be helpful I'm kind of stuck right now, and I have not found a way to expand my real estate portfolio. I have been stuck at 1 property for quite some time. 

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JD MartinBusiness Member
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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
10y

And thus you've discovered why the LLC thing can be a hindrance rather than a help at the bottom end. Instead of bothering with an LLC, I keep more than 7 figures in total liability insurance between my policies and a PUP. I suppose it's possible to be sued for more, but I can't possibly think of too many things involved with my rentals that could make me personally liable for such an amount, especially with the weight of the insurance company's law firm fighting on my behalf. I was with an organization once where one of our drivers ran a light and killed another driver (a young girl) and seriously injured her father, and even that case ended up settled at $1 million. Yes, there are occasionally large judgments, but they are rarer than popular culture would have you believe.

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  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    10y

    And thus you've discovered why the LLC thing can be a hindrance rather than a help at the bottom end. Instead of bothering with an LLC, I keep more than 7 figures in total liability insurance between my policies and a PUP. I suppose it's possible to be sued for more, but I can't possibly think of too many things involved with my rentals that could make me personally liable for such an amount, especially with the weight of the insurance company's law firm fighting on my behalf. I was with an organization once where one of our drivers ran a light and killed another driver (a young girl) and seriously injured her father, and even that case ended up settled at $1 million. Yes, there are occasionally large judgments, but they are rarer than popular culture would have you believe.

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  • Investor · Tampa, FL · Member since 2015 · 103 posts · 29 votes
    10y

    So your saying you never even bothered with the LLC route, and just got a large personal umbrella policy? I'm not sure how much a PUP policy is, but for someone starting off would that be expensive?

  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    10y
    Originally posted by @William Howley:

    So your saying you never even bothered with the LLC route, and just got a large personal umbrella policy? I'm not sure how much a PUP policy is, but for someone starting off would that be expensive?

     Exactly. Never bothered. Looked into it but more trouble than it was worth for someone starting out. I pay about $350/yr for $1.5 mil of coverage, caveat: you must have your liability maxed out on your rental as a requirement. It picks up where your landlord policy liability leaves off. 

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  • Investor · Tampa, FL · Member since 2015 · 103 posts · 29 votes
    10y

    $350 a year that is not bad. When you say "must have your liability maxed out on your rental", does that mean I need to get insurance on every single rental property as well? if so what type of insurance is that, renters insurance? What would be a normal price for renters insruance (if that is what I need) on a 50k property, like $40/month?

  • Jason BottPro Member
    Insurance Agent · Nationwide · Member since 2014 · 2k+ posts · 1k+ votes
    10y

    @William Howley In order to have a Personal Umbrella Policy (PUP) or a Commercial Umbrella Policy (CUP), each underlying policy needs to have a minimum required limit.  This can be different between insurance carriers, but most often, if you are doing a PUP, $500,000 of liability is needed.  For commercial, the underlying is typically $1M.

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