Rental Property Investor · Providence, RI · Member since 2019 · 11 posts · 3 votes
Hi everyone,
My brother and I want to start investing using an FHA loan, but we want asset protection as soon possible regardless of how much equity we have at first because the plan is to grow. Having said that, is it possible to transfer title to an LLC we create for the property while retaining the FHA loan? I've heard of using Land Trusts to do so but can't find anything in regards to FHA loans specifically
I'm not an attorney and this is not a legal advice but here is what I learned:
First, you want to make sure you have adequate liability coverage on your landlord policy, at least $300K. You could bump it to $500K or even a million. On top of that you can buy umbrella insurance policy, which will cover ALL of your assets. And only after that as third layer of defense you may want to consider an LLC. It looks that in your situation the LLC won't be necessary.
Now to answer your question - you can transfer title to an LLC and as long as you make your mortgage payments you probably will be fine. But it may trigger due on sale clause and there is always a risk of lender calling the loan due.