Rental Property Investor · Minneapolis, MN · Member since 2016 · 9 posts · 4 votes
The bank holding my mortgage has informed me that they have made a business decision to not allow properties to be transferred to LLC's. I have gone back and forth wether or not an LLC is needed, but after doing some research I have decided I would like to separate my rental properties from my personal finances.
Has anyone else experienced this problem? What would be the best way to solve it?
Rental Property Investor · St. Augustine, FL · Member since 2017 · 189 posts · 127 votes
7y
@Mikael Lickteig I have owned several properties and never used an LLC because it really doesn’t protect you in the end. What protects you is insurance, insurance, and then more insurance. Look into an umbrella policy that deals with owners of rental properties and you will be fine. You can get an umbrella policy for 5 million that is inexpensive.
Rental Property Investor · St. Augustine, FL · Member since 2017 · 189 posts · 127 votes
7y
@Mikael Lickteig I have owned several properties and never used an LLC because it really doesn’t protect you in the end. What protects you is insurance, insurance, and then more insurance. Look into an umbrella policy that deals with owners of rental properties and you will be fine. You can get an umbrella policy for 5 million that is inexpensive.
Attorney · Brainerd, MN · Member since 2015 · 18 posts · 13 votes
7y
Hey Mikael,
I am assuming the bank would want you a personal guarantor. Perhaps remaining a guarantor on the loan would allow you to transfer title. After all you want to have the liability protection of the LLC.
Rental Property Investor · Minneapolis, MN · Member since 2016 · 9 posts · 4 votes
7y
@Eric A. I have tried to get Umbrella policy with my current agent and he insists my 1 million dollar liability insurance is plenty on this property. I am thinking about switching agents
Rental Property Investor · St. Augustine, FL · Member since 2017 · 189 posts · 127 votes
7y
@Mikael Lickteig I would definitely change agents. They aren’t a very lucrative commission for most agents so they are not thrilled with them. You can easily get a 5 million dollar umbrella policy.
Investor · Broward County, FL · Member since 2018 · 1k+ posts · 938 votes
7y
Create a Land Trust where you are still the beneficiary. Transfer the title of your property with a warranty deed to the Land Trust. The Garn St Germain Act will protect you against any due on sale clause from your mortgage company.
Later on, you will assign your beneficial interest in the land trust to your LLC. As this assignment is not recorded, your bank won't know about it.
Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
7y
@Mikael Lickteig
I just transferred 4 of my bank owned properties over to my newly created LLC last summer. I didn’t tell them or even think about telling them. I’m wondering if my mortgage company will object.
Do I need to tell them? My insurance company (Allstate) said they didn’t care if the properties are in my name or the LLC. They said they prefer them being in my name.
Not sure if I really needed to form an LLC. I have 6 rentals and figured that would protect me in case something happens.
Accountant · Saint Louis, MO · Member since 2017 · 409 posts · 362 votes
7y
@Eric A. Insurance is important, but it is not a catch all. All the insurance company has to do is show how the claim is invalid due to xyz clause of your policy...
Bottom line: insurance is 1 part of a good asset protection strategy. An entity, trusts, and proactive thinking are other parts.
Check out @Scott Smith blog posts.
Rental Property Investor · St. Augustine, FL · Member since 2017 · 189 posts · 127 votes
7y
@Donald S. thanks for the reply and I agree with you when you have a large portfolio of properties. I won’t go into my own personal experience but trust me I know. If someone has a handful of properties it’s a waste of time. Also, there were a bunch of gurus years ago hawking asset protection courses and they all went away. Why? It really wasn’t needed in the end.
@Mikael Lickteig You are on the right track with wanting to separate your assets from your personal name. The single biggest way investors get sued is by holding investment properties in their own names. The post Donald is referring to is this one: www.biggerpockets.com/renewsblog/llc-lending-probl...
It explains how to use a land trust to keep your personal financing intact while executing a transfer ideally with the assistance of a qualified real estate attorney to an LLC or Series LLC structure.
Investor · Saint Peters, MO · Member since 2016 · 88 posts · 23 votes
7y
What is considered a hand full or a large amount of rental properties? Is there a break point? We have 4 not counting our own house. Were renting and try to keep 1 flip running.
@Mikael Lickteig
I just transferred 4 of my bank owned properties over to my newly created LLC last summer. I didn’t tell them or even think about telling them. I’m wondering if my mortgage company will object.
Do I need to tell them? My insurance company (Allstate) said they didn’t care if the properties are in my name or the LLC. They said they prefer them being in my name.
Not sure if I really needed to form an LLC. I have 6 rentals and figured that would protect me in case something happens.
Will create a technical default, which will make bank sell your loans to another bank and they might seize your properties. Is basically you are cheating bussiness. They gave you the money, not the LLC. Thing is like too much fake information on the internet regarding protecting assets. Get a full strong landlord insurance, and you are legally protected all directions. Fire, death on the tenants GOD forbid, accidents, etc are insurance covered , better than relying on LLC. LLC information is full of BS. If you have LLC you maybe 50% protect your personal and losse you bussiness. But my idea is , why to loose bussiness to start with? No matter what incidents to have plan strongly legally, to have all your personal and bussiness assets fully protected.
@Mikael Lickteig
I just transferred 4 of my bank owned properties over to my newly created LLC last summer. I didn’t tell them or even think about telling them. I’m wondering if my mortgage company will object.
Do I need to tell them? My insurance company (Allstate) said they didn’t care if the properties are in my name or the LLC. They said they prefer them being in my name.
Not sure if I really needed to form an LLC. I have 6 rentals and figured that would protect me in case something happens.
Will create a technical default, which will make bank sell your loans to another bank and they might seize your properties. Is basically you are cheating bussiness. They gave you the money, not the LLC. Thing is like too much fake information on the internet regarding protecting assets. Get a full strong landlord insurance, and you are legally protected all directions. Fire, death on the tenants GOD forbid, accidents, etc are insurance covered , better than relying on LLC. LLC information is full of BS. If you have LLC you maybe 50% protect your personal and losse you bussiness. But my idea is , why to loose bussiness to start with? No matter what incidents to have plan strongly legally, to have all your personal and bussiness assets fully protected.
I agree with you on this. Since then, my bank found out I put them in an LLC. I asked them if they wanted me to deed them back to my personal name and they said no, that’s ok. But told me not to buy any more in my personal name and switch them over. Lol. I’ve since tapped out with 10 conventional and loans and have put the rest in my personal name. But have bought 7 with my LLC with non qm or commercial loans since they don’t let you buy in your personal name.
bottom line is, is not worthed to make your mind work so hard, instead of paying insurance, you will pay lawyers and accountants with so many different LLC's which will take a lot of time , money,, and still you wont have peace of mind. Remember, you can't outsmart the laws of united States federal or states. So bite what you can chew, rather smaller profit and for sure goes to your pocket, than a little higher profit and you have to think for a future claim, law suit, bank seizing properties or even IRS in the future knocking you down. The way i think is that if my profit is $100 a month, i want to make sure stays on my bigger pockets for life without any reason coming out. I wish you luck and a lot of safe wealth.