All Forum Posts by: Brett Parker

I currently have a rental property and a primary residence in which I've lived for 6-years. I am interested in selling my rental property and converting my primary residence into a rental property. After doing this, I would then purchase my new primary residence. 

With this, can I do a 1031 exchange on the rental property I am wanting to sell to my primary residence that I'm wanting to convert to a rental property?

Thanks for any insight. Looked in BPockets and can't find anything about this. 

@Andrew Karhan, 

After much review and discussion, we decided not to form a LLC and instead put the property in our name. The biggest reason to not do LLC was interest rates and the terms associated with it (adjustable 5-year, 7-year, etc); it killed our cash flow projections.

We decided to put the property in his name with me on the deed. The next property will be in my name with his name on the deed. We both signed a joint agreement with our partnership terms. On all properties we own, we will carry a million dollar umbrella insurance policy along with requiring the tenants to get their own renters insurance.

The guideline is 4 rental properties per person or 5 total (your house). We're going to acquire as many as we can under our personal names. This is going to allow us to have long-term fixed interest rates (30 years opposed to ARMs and refinancing fees).

With that said, we can't get 20+ homes under our own names. However, if you stagger the purchases in the right fashion, we will be able to start using the rental income from our first purchase to help the debt to income ratio on the later purchases. Pretend you buy two homes on January 1st, 2017. After you file your 2017 tax returns, you’ll have some rental income there that will help your debt to income ratios for anything you buy after those returns are completed in 2018.

In the beginning, the LLC is not going to have tax returns. So the bank is going to use your personal income (at the beginning) and calculate the debt to income ratio from that. As you get down the road, your LLC will have tax returns and the bank will combine those with your personals.

@Derek Lacy, awesome stuff - big reason I post here is for experts like yourself. 

To get a commercial umbrella policy, do we have form a LLC or can we get a commercial policy without one?

Learned a lot in this post but have one question.

Me and two others are going the non-LLC route and want to do the added Umbrella Insurance for a SFH property. However, I believe Umbrella Insurance is tied to an individuals personal assets. I was quoted somewhere around $300 per year for a million coverage.  Does this mean EACH of us (three total) would need to get our own umbrella insurance? Because if that's the case, it would then total $900, which would eat into our cash flow. 

@Account Closed, my thoughts exactly. I would hate to trigger a due on sale clause. John - do you have any thoughts on the best way a group of three guys need to approach the financing aspect? We originally thought about LLC but we would be restricted to an ARM which we don't want.

Thanks Ann. But going back to the original question, if there are (3) investors in our group, would EACH person need to get their own umbrella policy if we went this route?

With a LLC you can only get ARMs from what I found. My goal is to buy and hold so this wouldn't be the best option - I want conventional 30-year.

I thought if you get financing under your name and transfer to LLC you risk the "due clause".

I can't find anything about Umbrella Insurance among a group of investors. 

Me and two others are looking to invest in a SFH property. We don't want to form a LLC due to the poor finance options out there. Per the posts I've read, Umbrella insurance is the way to go. 

After talking to my agent, he said each person would need to get umbrella coverage because its tied to your personal assets. That would be around $400 per person or $1,200 total which would effect our Cash Flow analysis. 

Is this the case? Are there other options I'm not thinking about? 

Thanks Thad. Are those the only main options we have as a group or did we miss something? 

Thanks Thad. Are those the only main options we have as a group or did we miss something?