Is it better to invest through an LLC if I'm licensed?

Question

I am licensed, and have gotten advice that it could help to form an LLC to invest through. What are your opinions, or what are you yourself doing? (Texas) I'd appreciate any feedback, thanks!

Jim Cummings · Answer

@Kian Tajadod. The real obstacle in using an LLC, whether Licensed or not, is you will be getting a Loan in the LLC name. This will be a commercial loan, probably 5-7 year balloon, 20 year Amortization Schedule, etc.

If you get the loan in your name, you can get FNMA, FHLMC rates, slightly higher than personal Loan Rates (today probably in the 4.75% - 5.00%) and a 30-Year Fixed Rate.

Unless you are have a number of properties already, I suggest buying in your name, and then buy an Umbrella Insurance Policy to cover any increased Liability you may perceive. You can get an Umbrella Policy for $2-$3 Million for approximately $500 Year.

An Umbrella Policy is also something you should have as a Licensed Agent, and transporting clients in your vehicle.

Kian Tajadod · Answer

@Jim Cummings

Got it, thank you Jim. I'll contact my insurance agent.

Jim Cummings · Answer

@Kian Tajadod. Obviously, the more properties you have the more exposure, whether the properties are in your name or LLC.

If you are licensed, and you transport clients in your vehicle, I would suggest you get an Umbrella Policy now. What an Umbrella Policy does is provide you with additional monetary coverage above the limits covered in your Residential Policies (Tenants), or your vehicle insurance policies.

Contact your preferred insurance agent for more details on an Umbrella Policy.

Kian Tajadod · Answer

@Jim Cummings thank you for taking your time to reply! I am working with a hard money lender to finance my investments. However, if I was to decide to refinance, I would assume the points you made stay very relevant. I've heard of the Umbrella Policy, but I need to look further into it. Would you say it's recommended to get it once more and more investments are made, or could I get it for the first few? Thanks!