More Likely: Due on sale transfer to LLC or Landlord being sued?

[Matt Holmer]

I recently purchased my second property using the BRRR method and am currently looking at doing a cash out refinance. In a perfect world, investors would be able to find portfolio lenders that offer long term, low fixed rate mortgages in the name of our LLC.

However, as I shop around for a loan to an LLC, it is clear this world is not perfect. I am finding a combination of high rates (at least a point higher), short amortization periods ( and short balloons. When looking for financing in my personal name, even without proper seasoning, I've received decent rates (4.5%) 30 year amortization and 15 year balloon based off of 75% of the newly appraised value. With 6 months of seasoning, there is the option for 30 year fixed at even lower interest rate.

With that being said, it got me thinking. Which is more likely to occur. 1) The bank calling a loan due on sale for transferring to an LLC, or 2) A landlord being sued and judgment entered in excess of my liability limits (500,000 per property, 1 million umbrella)?

Just thinking out loud trying to wrap my head around financing options as my portfolio grows.