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newbie
First off i would like to say this site is the best thing that ever happened as far as REI goes. I just purchased my first investment out in PA and was looking to put it up for rent.
The problem i think i have:
I brought the property as a primary resident instead of as an investor. (did that to avoid puttin 10%down, and reserve.)
I do plan on buying propertie as an investor in the near futuretho ...
Well anyway i wanted to know if there are goin to be any legal issues as far as renting out a primary residence. Are there thngs i have to change ie. insurance. will the bank change my terms of agreement if they know?
I spoke to an attorney briefly he and he said its not a problem. i also mentioned that i have an LLC and wanted to run the property thru my company. He told me its fine and that i can just sign the property over to my LLC and pay the transfer tax. Can i do that and keep my terms with the bank?
Can anyone help me get a clearer forecast. Thank in advance for any input.
Renting out a primary residence is not a problem and the bank will not change your terms. You should notify your insurance company. Putting it into your LLC is a simple process. I question the attorney saying that you would pay a transfer tax. Here in Nevada if you quit claim your property into an LLC there is no transfer tax as long as you are the sole owner of the LLC (your spouse can be an owner as well).
8)
sounds good. thanx 8)
Jeano,
I would look for a new attorney.
Making false statements in order to get a loan is loan fraud. Nothing will probably happen to you but I certainly wouldn't do it again.
You need a landlord insurance policy for a rental, not a homeowner's policy. A homeowner's policy probably will not pay if you have a claim with a tenant in the property. In addition, you need liability protection, which should come with the landlord insurance policy.
Transferring your property into an LLC violates the due on sale clause and the bank could call your loan due. That probably will not happen, but if they realize that you obtained a loan on the pretense that it was a home loan when in fact it was an investment loan, they may.
If you're going to be in this business, I would strongly suggest doing things honestly and legally in the future.
Good Luck,
Mike
thanx, you made some very good points
("Making false statements in order to get a loan is loan fraud. Nothing will probably happen to you but I certainly wouldn't do it again.") wasnt done intentionally
i definitly dont want it to go down as fraud. if things get to complicated i might just fix it up and go for the sale.
MikeOH, transferring a house from your name to a sole owner does not trigger the due on sale clause, it could if the ownership wasn't the same. I have done this and checked with the bank first. I have done it several times since and it is only a problem if the owner of the LLC is different from the owner on title. As far as they are concerned it is the same owner much like transferring from your own name into a living trust.
As far as the loan, if it was the purchasers intent to live there then it is legitimate. If it was done to avoid the primary occupant condition it could be considered fraudulent.
8)
702 it already says in his post that he commited fraud on the lender to save putting 10% down and meeting minimum reserves..