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Personal Mortgage & needing LLC coverage
Hello!
I was wanting to see if anyone has run into this problem and see if there was any feedback or suggestions.
My fiancé and I are in the process of purchasing our first investment BRRR property and we are using a conventional loan through our local bank. The program that my fiancé got his pre-approval with our bank (I own our primary residence so we wanted to get a loan in his name) is designed and offered for the purchase of a primary residence. With that being said, we are not allowed to put the mortgage in under our LLC name, it has to be the home owner name for this particular program with our bank.
That being said, has anyone run into this and if so, how were you able to protect yourself through your LLC when you start renting your property? Is there a way we can still use our LLC even though the mortgage is his name and not the LLC?
I understand I need to contact an attorney or CPA, but just wanted to ask on here and see if anyone else had run into this.
Thank you.
Should we just do an Umbrella Policy and not worry about the LLC?
Quote from @Haley Henderson:
Should we just do an Umbrella Policy and not worry about the LLC?
Hello Haley, from all the information that I've gained over the months made me come to a realization that LLC doesn't protect you for anything. So, I all my purchases are conventional under me or my wife's name. After I close on a couple of more property, I'll probably end up getting an umbrella.
I also spoke to a local lender and he works with plenty of investor and tells me majority of them purchases an umbrella over an LLC. In addition, he also told me it was cheaper when it came to tax time.
#1 Insurance Contributor
- Insurance Agent
- Norwalk, CT
Haley,
Regardless of whether or not you change to an LLC, and umbrella policy is a good idea. A personal umbrella is designed give you an additional layer of Liability coverage (usually in increments of 1 million) over the Liability coverage on your homeowners, personal auto policy, and rented dwelling policy. If the rental is owned in an LLC you need to makes sure that it is listed on the umbrella. If you are renovating the property first you will probably be under a renovation Builders Risk policy (commercial policy). It may have Liability included or that may be a sepparate policy. You should check to see if the personal umbrella will cover over that Liability.
Hey Haley,
If the loan is going to be under your name you will be better off just going with an umbrella policy. At least here in Texas LLC's arent as protecting as people think it is. In the case a bad scenario happens judges do have the right to go after you directly as well.. so my suggestion is to focus on the umbrella policy for protection. Hope this helps!
#5 Medium-Term Rentals Contributor
- Investor
- Youngstown, OH
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#5 Medium-Term Rentals Contributor
- Investor
- Youngstown, OH
It's just one property. The veil is pretty easy to pierce. Get good insurance, call it a day, and then start interviewing attorneys to discuss different options to pursue as you grow.
#2 Insurance Contributor
- Insurance Agent
- Nationwide
Quote from @Haley Henderson:
Hello!
I was wanting to see if anyone has run into this problem and see if there was any feedback or suggestions.
My fiancé and I are in the process of purchasing our first investment BRRR property and we are using a conventional loan through our local bank. The program that my fiancé got his pre-approval with our bank (I own our primary residence so we wanted to get a loan in his name) is designed and offered for the purchase of a primary residence. With that being said, we are not allowed to put the mortgage in under our LLC name, it has to be the home owner name for this particular program with our bank.
That being said, has anyone run into this and if so, how were you able to protect yourself through your LLC when you start renting your property? Is there a way we can still use our LLC even though the mortgage is his name and not the LLC?
I understand I need to contact an attorney or CPA, but just wanted to ask on here and see if anyone else had run into this.
Thank you.
Haley, this is a very common issue. We see our clients do 1 of 2 things;
1) Keep title in their name and purchase an Umbrella
2) Close in your name and then quick claim the deed to the LLC.
With #2, many beginning investors are scared the loan will be called, but I have yet to see that happen.
Quote from @Luyen Nguyen:
Quote from @Haley Henderson:
Should we just do an Umbrella Policy and not worry about the LLC?
Hello Haley, from all the information that I've gained over the months made me come to a realization that LLC doesn't protect you for anything. So, I all my purchases are conventional under me or my wife's name. After I close on a couple of more property, I'll probably end up getting an umbrella.
I also spoke to a local lender and he works with plenty of investor and tells me majority of them purchases an umbrella over an LLC. In addition, he also told me it was cheaper when it came to tax time.
Your comment that "LLC doesn't protect you for anything" is very interesting. Could you please expand on that? Is that true in all situations? For example, do different states have different types of protections? Or does it matter how many properties the LLC owns?