LLC, Asset protection and Mortgages

[Phil Kurumunda]

Hello - I am in the process of buying a few buy and hold investments. The terms on the mortgages favor conventional residential loans vs commercial, notwithstanding the bank underwriting grilling one gets from the typical residential conventional loan. It is very rare to find a conventional loan that will do business through an LLC. Commercial loans allow for this, and the underwriting is easier, but heavier terms are unfavorable for cash flow. (Higher down, higher variable rate, etc)

2 Questions:  

1) Can I transfer ownership of the mortgage to the LLC over time, some mortgage laws prohibit this and void the contract if this is done. However some bankers look the other way and dont care as long as you have a good payment and credit history.

2) If the above is NOT allowed, then what alternatives does an investor have to protect personal assets from unscrupulous tenants who may look to go after at personal assets in case of a lawsuit?  I know insurance covers landlords and the insurance companies have high powered attorneys to prevent these, but not sure if tenants can turn attention to personal assets. Any advise would be appreciated.  

Cheers 

[Curt Davis]

#1) You can do a Quit Claim transfer into your LLC and if the bank find out about this they have the option to call the loan due. I have heard as long as you wait a few months after your purchase and then do this you should be ok. One thing you need to check into is your title insurance. Some companies will void it so make sure your title insurance will cover your LLC.

#2) For more protection just get an umbrella insurance policy for an additional 2 million. LLC's are not bullet proof.

Good luck