I enjoyed reading the various topics in RE investment and actually had questions on forming a LLC. So I recently closed on my 4th rental property and currently have all of them under my name. All 4 are financed via mortgage from various banks.
1. Am I able to move properties in an LLC, even if they have mortgages? I am guessing the Bank would not approve of this.
2. I spoke to an attorney and he mentioned I could put each property in an LLC and don't need to get bank approval. They won't know until I miss a mortgage payment.
3. What about if I try to purchase a 5th property, will the same banks still finance me going forward if I form LLCs?
4. Same attorney also mentioned its about $500 (a property) to form an LLC and of course I'll have to deal with the annual paperwork for the state.
5. Is there some sort umbrella insurance I should get for all the properties?
Sorry if the questions are repeats from other posts.
1. Transferring a property from your personal name to an LLC is usually a violation of the due on sale clause. It's rare, but a bank can enforce this clause. In fact, here's an example from right here on BP: https://www.biggerpockets.com/forums/311/topics/183825-due-on-sale-clause-was-called-by-bank
2. The most common way a bank would find out is when they receive a copy of the new insurance declaration showing a new insured name (the LLC instead of yours).
3. If you try to buy it in the name of an LLC, you'll likely be limited to commercial loans which don't have as favorable as terms compared to when you buy in your personal name.
4. The cost depends on your state, but it can run from $50-$800 so I’d assume your attorney is correct.
5. Yes, umbrella insurance provides a lot of coverage for a very low cost. Usually 1-2 million in coverage only costs a couple to a few hundred dollars annually.
Anyway, just some things to consider.
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