Contractor · Moss Point, MS · Member since 2020 · 4 posts · 1 vote
Here’s the situation. I’m currently in a small 2 bedroom 1 bath home and I am in need of a bigger home with 3 bedrooms as my daughter is growing up fast and she isn’t going to want to share with her brother much longer! So, here comes the question, what is the best way to go about making my current home into an asset while getting into a newer home my family can enjoy and continue to grow and mind my business?
Also, putting your property may not be worth the trouble, and may also trigger a due on sale clause for your home loan if you have one. So that is something to be aware of. An umbrella insurance policy like @Darius Ogloza mentioned should be more than sufficient.
Contractor · Moss Point, MS · Member since 2020 · 4 posts · 1 vote
6y
Yes I’m very sure I can have a positive cash flow from my current home being a rental. Thank you for your response! Would it be beneficial to create an llc and have the house in its name? How would that work if so.
Investor · Tulsa, OK · Member since 2019 · 14 posts · 20 votes
6y
First, I am not licensed to practice law in your state and this is not legal advice.
In our real estate investing, we use an LLC for everything. If something goes awry, then we want separation from our personal assets. While liability insurance is used, the LLC acts as the last line of defense. For example, if there's a fire resulting in death or severe injury, insurance is where you look first. But, did you buy enough coverage? Is there an exclusion that ends up with no coverage for the claim?
You should consult with an attorney in your jurisdiction to find out the benefits and the costs for an LLC before you take the next step. Ask about any mortgage and due on sale clause that might trigger the mortgage coming due.
Investors that ignore the legal issues and forego getting solid advice from an experienced attorney tend to find their way into all kinds of scenarios. Most of these little adventures are expensive.
Also, don't forget to check with a competent C.P.A. or tax advisor and consider any tax implications. There may not be any, but you want professional guidance.
Your strategy is taking you from being a homeowner to a business owner.
From the view of an REI - find yourself a RE attorney and get some legal advice. Good luck!
This is not legal advice and I am not forming an attorney-client relationship.
Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes
6y
I own several properties in highly litigious California as well as properties in Las Vegas, New York State and Florida and have never formed an LLC. I use landlord insurance (typically covers about $300K-$500K in liability) along with an umbrella policy which provides an additional $2M-$5M in coverage (depending on your asset base/what you need). Forming an LLC would cost me an extra $800 per year in Cali alone and tax preparation time/cost that I do not believe is worthwhile.
My thinking is that forming an LLC for a single rental in Moss Point is overkill. Talk to your insurance agent.
Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
6y
Before renting out the current property I would run the numbers. It's imperative to consider expenses like vacancy, property tax, CapEx, maintenance, PM, and insurance. When you factor that stuff into the equation the cash-flow changes. Don't let a rental or bad tenants drag your family down. If you only have a few properties I don't recommend starting an LLC. It's going to cost money every year and add complexity for financing.
Also, putting your property may not be worth the trouble, and may also trigger a due on sale clause for your home loan if you have one. So that is something to be aware of. An umbrella insurance policy like @Darius Ogloza mentioned should be more than sufficient.