I recently completely paid off one of my rental properties and am weighing options on what to do next. The property is currently in my name but I am planning on quitclaiming it to an LLC I formed. Once I have the property in the LLC I am looking to do a HELOC on the property and use the money to buy another rental property through the LLC. I am just wondering if this makes sense. I am only a few years into the investment game and looking to hear from other investors if this makes sense or if theres a better approach to what I want to achieve (ultimately owning more properties). Thanks for anyones input in advance!
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
5y
Josh:
I'm not a lawyer, but this is what I would do given the little I know about your situation.
I would not put the property in the LLC. (If you like, use the LLC for managing the business to make tax deduction easier.) I would do a cash-out refi for the maximum I could get out. I'd use a conventional mortgage to get the best rates and terms. Assuming 75% LTV, I'd go buy three more properties just like that one, using conventional mortgages.
Beauty of this strategy, if you are in a good market, it will maximize your cashflow, increase your opportunity to benefit from appreciation, and reduce your risk of lawsuit. (Lawyers love to attack houses with no mortgage but usually only go after insurance liability on ones with mortgages.)
Insurance Agent · Norwalk, CT · Member since 2016 · 2k+ posts · 1k+ votes
5y
Josh,
Check with your current Insurance agent and make sure they can just change the insured to the LLC on the policy. There are some companies that will not write LLC's and others that will want more info on the LLC (other members, any other operations, etc.). If you do have to move to a different Insurance company you can have that all lined up and know the costs.