Transferring To LLC After Closing - Single Family Dwelling

33 Replies

@Will Jayne

There is a lot of information here and I tried to keep up, but not all of it is relevant to me, so I glossed over most of it. Sorry if this has been addressed already.

I have LLCs for my properties and I’ve bought personally and transferred them to LLCs and I also have done that with lenders. I haven’t had any issues, but also haven’t been tested with lawsuits.

My comment is on the insurance side. Reach out and I can put you in touch with a couple of good agents. One guy in Orlando has been my go to, but I recently worked with a girl through one of my hard money lenders that was able to secure a better policy for a problem property and it may fit your situation.

It's a property held by an LLC that needs a rehab and it's less than a half mile from the coast, so I typically have a difficult time getting insurance. Last year I did a vacant home policy through Lloyd's of London and it was pretty pricey - over $2k for 90 days!

This lady helped me get a vacant home policy with hurricane protection for about $220/month so I can cancel it when the renovations are completed and then convert to a standard policy. I typically go with DP1 policies and keep enough reserves to protect against major issues. Most of my policies are with American Integrity since they are still writing coastal policies in FL, but Universal P&C has one of mine as well and they are competitively priced.

I’ve worked with several insurance brokers over the past 10-12 years, but I’ve finally got a few that get what I need when I need it now. It doesn’t hurt to have another contact if you need one. PM me if you’d like their info.

Originally posted by @Justin Manges :

@James Palassis I’m a newbie… what is the umbrella policy for?

An umbrella policy kicks in if you are sued for amounts over what your typical homeowner's policy covers. If someone slips and falls down your stairs, or if there is a horrendous dog bite/attack, if someone sues you for exorbitant medical costs over what your homeowners policy covers, your umbrella policy would kick in and pay without you having to dip into personal funds. It's relatively cheap compared to the amount of coverage provided. We keep a $2M policy. 

@Justin Manges

Yes, many investors here on BP use a homeowner/landlord policy, an umbrella policy, and keep their properties in good repair. Actually, even if you have a LLC you need most of that anyway. I don't want to hijack this thread, but let me know if you want to dsicuss or send you other discussion threads so you can read about.

Originally posted by @Justin Manges :

@James Palassis sorry I have another newbie question.

Do people have these in place of LLCs, or in addition too? I've seen a lot of conflicting opinions on here about whether you should even do an LLC.

They are just two different forms of protection. The LLC protects your personal assets because a lawsuit would only go after the assets held within the LLC. But if you're purchasing a property and taking title directly into the LLC, you'll most likely have to use a commercial loan. These have higher rates and shorter terms (the longest I could find was a 15 year fixed at a local lender).

The umbrella policy is used if you are taking title in your personal name. You don't have the asset protection that an LLC gives you, so you protect yourself with the use of the umbrella policy. Unless your net worth is extremely high, I wouldn't think you would need an umbrella policy if your properties are held in an LLC.

 
Those that are buying personally and transferring to the LLC are getting the best of both worlds... conventional financing and LLC asset protection. But it comes with the risk (however small) that the lender can say "no, you told us the deed would be in your name" and exercise the due on sale clause.

As you have probably found out, people have VERY strong opinions on both sides. It's totally a personal decision based on the goals you have for your real estate investing. Study both sides of it and do what works for you personally. There are pros and cons for each strategy. 

@James Palassis

Sure, if you have multiple properties held by the LLC you might want, and people have had, an umbrella policy for the LLC. I think it might be more warranted as the loans get older and there some actual equity of yours to protect. I think the issue with "frankensteining" the Title and loan is the co-mingling aspect that has to be handled since the mortgage is in your personal name.

But, like you said, there are many opinions and many ways of doing this aspect.  Thanks.