Create an LLC BEFORE purchasing a Multi~Unit?

Question

Dominic R. · Answer

Maybe it's overkill but I keep my single family rentals in an LLC to shield my personal assets from legal action.  Let's say someone does something stupid and falls from the roof or electrocutes himself duing some sort of unauthorized modification.  Possibly a drunken fall off the deck.  I don't want to take the chance with our court system siding with the other party out of pity and let them go after my personal property.  I like the added layer of insurance for only a 150$ dollars a year

Dominic R. · Answer

When I purchased my last property my attorney created and quitclaimed the property into an LLC at the closing and only charged me a couple of hundred extra for the paperwork.  I like to keep things simple.

Brie Schmidt · Answer

If it is over 5 units and you plan on financing it, then yes it will be a requirement

Daniel F. Harb · Answer

Excellent. Thank you for your time and advice, Dominic. :)

Dominic R. · Answer

As Brie says you don't want to do anything to "pierce the veil" of the LLC so following the law is extremely important with a LLC.

Daniel F. Harb · Answer

Wow, I don't mind overkill for protection! I'll have to do my due diligence. Thank you, Dominic!

Daniel F. Harb · Answer

Thank you so much for your expertise, Brie. Really appreciate your time. I'm going to have to watch your podcast today in between patients. Hope the ER is slow!

Best to you!

Brie Schmidt · Answer

Depends on how you plan on financing it.  A residential loan with 30 year fixed will not allow you to buy it in a LLC, you can transfer it after but from my understanding that provides no liability protection as you have "pierced the veil" by buying it in your name, additionally the loan won't allow it and if they catch it then the due on sale clause will be triggered, making the entire loan balance due in 30 days.  I'm told you can avoid this by transferring it back to your name.  So it sounds like a lot of work with no benefit.

Daniel F. Harb · Answer

Thank you,  Dominic R.!

Best to you.  $$$

Daniel F. Harb · Answer

Ah, duly noted. Thank you kindly, Brie. Would you suggest an LLC even if one had 2,3, or 4 units?

Thank you!

Create an LLC BEFORE purchasing a Multi~Unit?

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