LLC question — new investor with no history (financing and liability)

[Kevin H.]

I'm a newbie around here, and I'm honing in on my first investment property purchase. I already know that an LLC is a good way to setup a rental business as a means of insulating my personal assets from potential litigation, but I'm not really sure HOW I can go about obtaining financing through a newly formed LLC.

My personal credit is stellar, and my personal home is owned free-and-clear. I've got sufficient money in the bank for a downpayment on any of the properties I'm considering (mostly under $300K). What I don't have is an LLC with any kind of history, nor do I have the cash to buy all of the potential properties outright. I'm assuming that most banks will require me to guarantee the new loan personally, even if I form an LLC tomorrow.

I'm also concerned that if I've already found the perfect property, I might not have time to establish an LLC before making an offer. Along those same lines, I know most lenders won't allow you to transfer the title of a property into an LLC while the loan is still in existence.

So, aside from accepting bad terms on a hard money style loan, what are my options here? 

1) Do I put a place under contract, then quickly form an LLC, and then buy in the name of the LLC backed by my own signature? In that instance I imagine I'd need to carry a significant amount of liability insurance to protect my existing assets.

2) Do I buy in my own name, carry a significant amount of liability insurance, and later change ownership to an LLC once the place is paid off?

3) Am I missing some other obvious options here?

Any assistance would be greatly appreciated!  I'm excited to get into this business, but I sure don't want to put myself in a bad spot given the litigious nature of today's society… it only takes that one tenant to make your life a living nightmare, and risking everything I already have is not part of my business model! 

[Curt Davis]

@Kevin H.

#1. You dont need an LLC to start out with. Make sure you have an umbrella insurance policy in addition to the normal insurance you will have on the home. LLC's are not 100% effective should you get sued.

#2. You can purchase under your name and then about 60-90days after being the owner you can quit claim the homes to your LLC. You will still be the owner but they will be in your LLC.

Umbrella insurance will serve you better then an LLC. LLC's are nice to have though no one really knows why exactly you need one. Its just another entity you pay taxes and yearly renewal fees on.

Good luck