My wife and I just purchased our first duplex in early Feb 21' that we are rehabbing and house hacking in. We purchased this property utilizing an FHA loan with 3.5% down at a 2.6% interest rate. I always had the intention of creating an LLC. immediately to protect our personal assets in case of a lawsuit. Our mortgage broker informed us that if we attempt to transfer our loan into an LLC. that it would automatically default on the loan unless we paid the balance in full. We have a large umbrella policy on our insurance, but we want to take all of the correct steps to insure that we are protected. We live in the Akron, Ohio. Our goals revolve around purchasing multi family homes (2-4 units) in the near future as we begin our time real estate investing. We are meeting with an attorney to discuss options this evening, but I wanted to reach out and see if anyone else has ever been in a similar situation. If anyone has any experiences with this situation or guidance it would be great to hear from you.
I am in a similar situation. From doing a bit of research my conclusions are this (and I'm open to being corrected):
1) If you get your house under your name, the option out of it is a refi - but this means higher interest rates if placing in the LLC. Also, with a refinance, atleast 25% equity is need at a minimum (as far as I've seen).
2) The umbrella policy should be suffice for a smaller portfolio.
3) I'm keeping the umbrella until I get to a sizeable portfolio (3 or 4) then start strategizing on purchasing with the LLC (and thus lower less attractive financing). The small portfolio should help me get me more cashflow / funds for more deals. I want to max out the amount of Fannie and Freddie financing (which has better terms) before I start going into commercial financing required for the LLC.
4) The end goal would be to refinance the properties under my name, or to pay them off to get them also into an LLC.
It should go without saying, this isn't legal advice (far from it lol), but this is my strategy.
I appreciate your response!
Yes, I agree with you there as well. I've seen anywhere from 25-50%. I like your strategy though and it seems that I will be heading down a similar path. I am going to be digging into Fannie and Freddie financing since I have used my FHA loan.