This is my first time to this Forum. I just started some reading and doing research in Real Estate investment which is really appealing to me and wanting to go further. Here are some questions I have.
I currently live in MN (primary residence). One of my friend who lives in west coast has some single family homes in Tx renting. With his help and his friend in TX help I also decided to buy a new single family home and rent it.
I took loan from Bank as second because I’m qualify for second home. Therefore the title will be on my name. The question is :
(1) is it better off create a new LLC and put the home on LLC name or is it pretty safe to keep on my name and keep renting it. What risk I am getting into by keeping my new home on my name. I have read lots of book and articles about saying protect your asset by creating LLC but I’m not clear on all the aspects.
(2) If I take a route to create a LLC do I need to tell my Bank that I’m now changning to rental property?
Mind you I’m no expert on this field and you may wish to speak with a lawyer
I will say However if you inform the bank it is going to be in an LLC that will send up red flags and they will look at it as an investment property which will most likely change your loan ability and interest if they even give you the loan!!!
as many banks want nothing to do with investment loans at this time.
The topic is as differant as types of units to buy> each person has to make up thier own mind as to how much risk they are willing to take on any move they make
Some people form an LLC for each and every property others get into trusts and some do nothing at all.
I will say this if you Buy in your name and rent it out>
I would at the very least recomend an Umbrella Insurance policy
they are not expensive and offer you quite a bit of protection past your normal insurance on the unit.
it is My firm oppinion that anyone who has a home Needless to say more than one home should >
at the very lease have the proper insurance in place to protect thier assets should they get into an accident or have a someone file a claim of injury!
this will help reduce your personal liability and help you sleep better at night :smile
Personaly speaking> I find I have much more flexabilty Holding my units in my name versis a LLC and don’t intend on going LLC with my rentals for some time to come>
I still only need to do 1 Tax return instead of Two or many!
Keep in mind with LLC you are required to file each LLC as a seperate tax return this gets costly!
also I tend to keep my auto policies up around 250/500 both business and personal
My homes are insured as rentals and I make the tenants take out a renters policy!!!
I carry a Million UMB on my personal and a 2 million UMB business
I have had some serious claims against me over the years Including one where a woman Had well over 300K work done >do to an auto accident>
at no point has My personal property ever been at risk do to the way I insure them!!!
So in my case My Business is LLC but my rentals are not!
Im sure the Pro’s will have plenty of feedback for you
You applied for financing as a second home on a property you always intended to use as a rental. You lied on your loan application. This is loan fraud. If the lender is federally chartered, then you committed a felony. A conviction carries a fine up to $250K, up to two years in prison, and your loan will be called due. Just so you know for future reference.
(1) is it better off create a new LLC and put the home on LLC name or is it pretty safe to keep on my name and keep renting it. What risk I am getting into by keeping my new home on my name. I have read lots of book and articles about saying protect your asset by creating LLC but I'm not clear on all the aspects.
No one on these forums can answer this question for you. We don’t know you, don’t know your financial situation, your legal situaion, your marital status, or about any other business activities in which you may be engaged.
The question of which business entity, if any, is appropriate for you in your specific circumstances needs to be answered in consultations with your financial planner, your tax advisor, your CPA, and your attorney
(2) If I take a route to create a LLC do I need to tell my Bank that I'm now changning to rental property?
Won’t hurt to ask. Lender may not care. Lender may call the loan due and payable in full. Banks make commercial loans to LLCs. Banks do not make residential mortgage loans to LLCs. The lender will find out sooner or later because you will have to change your insurance policy and insurance carrier will notify lender of change in status and named insured.