All Forum Posts by: Nicholas W.

@Nicholas W. Very interesting. But as Serge S. explained, "They noticed that I had a named insured of my LLC added to my insurance." That was a mistake; from what I've learned you are supposed to keep a cheap "dummy" insurance policy in your name only for the purposes of the lender and purchase another comprehensive policy in the name of the LLC that's not listed with the lender. Note - that's the only way the lender figured it out. The bank won't run title searches on every property they finance. (Or will they?)

I also noticed that rather than demand payment of balance due or face foreclosure, the bank allowed him to transfer title back into his own name. So... nothing disastrous happened.

Although, I just noticed a further post on that thread that says "@Dion DePaoli has said perhaps the biggest risk is the lender selling packages of loans and this is caught in the due diligence of the sale." So I guess there is a reason they might pull title.

@Ramzi Nuseibeh I don't know much about insurance but $2M doesn't sound like a lot to me. What if multiple persons are injured in an accident? If an LLC does what it's supposed to do, though, it doesn't matter if you're sued for even $20M - only the assets of the LLC are liable.

Going back to the transfer of title topic. I was told that once the loan is sold to Fannie and Freddie, no one is going to run title searches on all the hundreds of thousands of mortgages and find that you violated DOS clause by transferring title to your LLC. And in the worst case scenario, that the bank found out and actually wants to call the loan, you can just transfer it right back into your own name. A mortgage broker told me banks understand that people do this and they don't really care but they can't loan directly to an LLC as previously mentioned in this thread because of F&F rules. She told me that once when a client of hers was refinancing the bank made him put the property back into his own name from the LLC before the refi, knowing full well that right afterward he was going to transfer it back to the LLC...

Curious, has anyone heard of tenants actually winning for something like falling down the stairs, tripping, or whatever?  Obviously I don't want to lose my rental units either, but better than losing my house, too!  

Also, I guess we'd have to make sure the LLC has it's own bank account so it acts on it's own, even if it is a single member pass thru LLC, correct? However, it's OK to transfer money between your personal account and LLC and not endanger your protection, right?

Thanks!

Ramzi

Had to check before responding, and the answer is "no."

My name appears in the operating agreement, along with the other members. But it does not show up in any documents that can be found online. Maybe in the IRS filings, but that shouldn't be public information. If it is I stand corrected, but I don't believe the IRS documents are public information.

Nicholas W. in most cases? Maybe but who really knows?

I am most definitely not the registered agent of any of my LLCs.

The limiting of liability goes hand in hand with disguising ownerships. The plaintiff wants to sue the owner of the property. Disguising that limits the true owners liability.

These people are not going to speak up about it on a public forum. The whole point of the LLC is to disguise heir ownership of the property. Wouldn't talking about it defeat the purpose!?

@Nicholas 

@Nicholas W. I think you have a lot more figured out than most will give you credit for. Run around setting up LLC's & S-Corps or run around finding deals. I choose the latter.

I, like you, also have my own business as my 9-5 which is a LLC and also I have 2 separate LLC's for properties. One LLC for properties in each state as I live in a border city. I'm certainly not going to go setting up a separate LLC for each property I own as some suggest.

I do believe LLC's are a good thing but I am very cautious not to co-mingle funds. Each LLC has its own checking account. I also refuse to transfer properties into an LLC when the primary note is in my personal. I believe my $2M blanket policy is much more protection than any LLC.

As you grow you will find a desire to have a LLC but don't waste your time setting it up for your first venture into real estate.

@Nicholas W.,

"Has an LLC ever protected you first hand?"

I think that's rather like asking whether a storm cellar has ever protected you from a tornado. When you need it, it's too late to start digging. One of my local mentors says, "Dig your well BEFORE you get thirsty.

Is a business entity structure "worth the trouble"? It depends.

Would it be"worth it" to have better protection when someone discovers you hold real property in your own name, figures you have a ton of insurance coverage and decides to make his/her own payday by going after it? (Remember: in that scenario, your personal possessions and holdings are exposed and at risk.)

Would it be "worth it" to have a "plan B" if something happens to your personal credit? If your entities each have their own credit you can fall back on having the business extend you credit or some other strategy until you can get your personal credit unhosed.

If you find the demands of running a business daunting, you may want to get a W2 gig and do REI as a hobby if that's more within your comfort zone.

What type of umbrella policies are you getting?  1mill?  Above?