Tucson, AZ · Member since 2018 · 66 posts · 43 votes
5y
Hi Vishal!
If you're just starting out an umbrella policy is likely the way to go. It is much simpler and the nice thing with this is the umbrella policy can cover multiple properties as you grow.
Also, lenders will not allow you to close the mortgage loan in an LLC name. It has to be your personal name as it is much harder to foreclose if things go south. After closing you can change the deed over to an LLC but that could trigger the entire mortgage being due if the bank finds out.
All that being said nothing is preventing you from registering as an LLC as it is easier to split up expenses and revenues from your personal accounts and still having an umbrella policy too. Hopefully this helps!
Real Estate Broker · Hyde Park Tampa, FL · Member since 2019 · 2k+ posts · 3k+ votes
5y
If you're financing through a traditional lender, you most likely will not be able to title in the name of an LLC. The Umbrella Policy is a good step but it's not enough; here are a few other things you need to do to protect yourself:
1. Require your tenant carry Renter's Insurance with Landlord As Additional Insured coverage.
2. Keep your property is good condition and handle maintenance issues quickly.
3. Know your Tenant/Landlord Laws for your state (it's hard to overcome stupid).
4. Have a lease - with an Addendum - on all the details and say it in plain language. Then here's the biggie: Manage to it.
5. Collect rent electronically and insist it be received on time every time.
The greatest risk to a landlord is failure to manage to the lease. It was found to be the one constant in major liability claims/lawsuits by AAOA.
And, congrats on what I'm sure will be the first of many rentals to come.
Rental Property Investor · Carrollton, TX · Member since 2021 · 11 posts · 2 votes
5y
@Ryan Husser - That is what my loan officer suggested as well. Get a loan and switch it over to LLC. However, he did not mention about the every thing during if banks finds out. I will follow up on that point. Thanks.