That's fine, you didn't say, there are those who advocate doing what I mentioned.
That is going to cost you something, financing charges for any LOC. It's not worth the effort or money in my opinion. Any attorney who passed a bar exam will know that the lien amount filed is not the balance owing. Some security agreements recite the type of line as being for a LOC, so in reality it's not a deterrent to filing any suit against you. If you own RE chances are you have insurance, that in itself provides the deep pockets to go after you if you messed up. :)
I've heard of this, called "equity stripping," to make you/your entity less attractive to litigants who might go after those assets. I haven't used it and I'm sure the benefits of the strategy will vary state by state.
Borrowing money and filing a mortgage is no problem.
I understand you asking with regard as an asset protection ploy.
Call your Recorder at the courthouse and ask what the penalty is for intentionally filing false documents in the land records is. I'm sure there will be jail time available.
It had to be some idiot guru who initially suggest this, it's a sham transaction.
My suggestion is don't do anything you would not have to explain to a judge.
That's a pretty simple rule, common sense can usually guide you. :)
That's fine, you didn't say, there are those who advocate doing what I mentioned.
That is going to cost you something, financing charges for any LOC. It's not worth the effort or money in my opinion. Any attorney who passed a bar exam will know that the lien amount filed is not the balance owing. Some security agreements recite the type of line as being for a LOC, so in reality it's not a deterrent to filing any suit against you. If you own RE chances are you have insurance, that in itself provides the deep pockets to go after you if you messed up. :)
@Randy King , when it comes to liens on property even lines of credit, when you borrow the money goes somewhere. If your property is in a LLC you have to spend it on the LLC if you borrow and pocket the money it opens the door to pierce the corporate veil. You have to observe corporate formalities with minutes etc on all major transactions you do. A mortgage just to reduce liability is an extremely poor practice. Your business decisions need to be based on obtaining profit. If you were sued and the plaintiff showed you had done some type of fraudulent transfer they could ask the court to undo it, even more you would lose credibility with the court. Many times in court it comes down to who the judge believes, if you were caught doing a fraud your credibility will suffer.
Good insurance and good management practices are very important. If you truly want to limit liability beyond that get with a good attorney. There are better legal ways to reduce liability, but each carries its own dangers.
Example you own the LLC by yourself that holds your rental, but your spouse and you own your personal residence as tenants by the entireties, and your wife has the CDs and stock accounts in her name only. Benefit even if they sue you personally you only lose whats in the LLC, they cannot touch your personal house, CDs, or stock account because only your wife's name is on it. If she is not active and not in the LLC they cannot attach tenant by the entireties property as both parties have total ownership, both parties have to owe the debt to attach property held in that fashion. It is available only to husband and wife. Drawback, if wife gets fed up with you she can empty the accounts, head to Hawaii and file for divorce, since you are not on the accounts not much you can do.
I will be interested to see what other responses you get.
I guess the basics would be as a 'con' is that you would then need to worry about 'cash flow' compared to having it free and clear.
The 'pro' would be that you could leverage those funds more progressively.
I am currently working on finding Private Funding for a free and clear property I own in my SDIRA (harder than a non IRA property). One of the main advantages I see would be that I could have say 4 properties if I could find 75% financing and achieve a higher return (I am looking a long term wealth compared to current cash flow) AND I would have quadruple the appreciation.
From a legal perspective, I will let others chime in. I am sure there are LOTS of different ways to look at that angle of things.