Investor · Chicago, IL · Member since 2016 · 160 posts · 41 votes
Hello
I am a new investor from Chicago. Recently I have purchased my first fix n flip property. I have put the title in my wife's name when the property was purchased. Now I am trying to form a LLC as everyone says LLC is the way to go to protect my personal assets from any trouble in future. I came to know that if I transfer the title to my LLC now it will cause FHA buyers to be not able to purchase my property for at least 90 days.
I have couple of questions:
1)When that 90 day FHA rule starts? is it from the date when the property was purchased or the date when the title is transferred to the LLC...
2)Is there any other ways to protect my personal assets without forming a LLC so I don't lose FHA buyers for my first project? I will of course put future properties in my LLC to begin with.
Sorry for the newbie questions..Thanks in advance!!
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
10y
A transfer of title to the LLC will trigger a new 90 day clock. The "have to put in an LLC" is a bit over blown. Just have good insurance, and do things properly. Your potential liability is less with a vacant house than with a rental anyway.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
10y
A transfer of title to the LLC will trigger a new 90 day clock. The "have to put in an LLC" is a bit over blown. Just have good insurance, and do things properly. Your potential liability is less with a vacant house than with a rental anyway.
Investor · Fort Walton Beach, FL · Member since 2015 · 568 posts · 966 votes
10y
@Dhru Das We are actually going through a similar scenario. We bought our first rehab/flip and have initially purchased it in my husband's name. The area we bought in has 3 main financing options for buyers - FHA, VA or USDA. We may just leave it in my husband's name because of that.
Investor · Chicago, IL · Member since 2016 · 160 posts · 41 votes
10y
Hi Wayne...thanks for the reply!
Having good insurance might be a good option for me in this case. What kind of insurance coverage do you recommend for a fix and flip project...it will be a gut rehab as the house has extensive fire damage and everything will be replaced.
Investor · Chicago, IL · Member since 2016 · 160 posts · 41 votes
10y
@Arianne L.similar situation here...the area I bought the property in, FHA/VA most likely is main financing option. As @Wayne Brooksindicated I will see what kind of insurance coverage I can get and just go with that.
Rental Property Investor · Fort Wayne, IN · Member since 2016 · 258 posts · 177 votes
10y
Is this 90 day rule everywhere in us or certain states. I bought a fix and flip property today in the name of LLC in Fort Wayne IN so do we fall under that rule.
I am a new investor from Chicago. Recently I have purchased my first fix n flip property. I have put the title in my wife's name when the property was purchased. Now I am trying to form a LLC as everyone says LLC is the way to go to protect my personal assets from any trouble in future. I came to know that if I transfer the title to my LLC now it will cause FHA buyers to be not able to purchase my property for at least 90 days.
I have couple of questions:
1)When that 90 day FHA rule starts? is it from the date when the property was purchased or the date when the title is transferred to the LLC...
2)Is there any other ways to protect my personal assets without forming a LLC so I don't lose FHA buyers for my first project? I will of course put future properties in my LLC to begin with.
The 90 days start from the date you closed or your closing was recorded. In general the 90 day rule should not be a big deal. If you add up the number of days projected for your renovation, the average days on market after a renovation & the average time it takes for an FHA loan to close (Which is normally 30 days) you'll find 90 days usually isn't a problem. A quit deed to your own LLC shouldn't affect the 90 days. BTW: Putting in to an LLC after you close kind of defeats the purpose of asset protection especially if you're only going to hold the property for short period of time.
You can protect your assets using Land Trusts. Either you/your wife and/or your LLC can be the beneficiary of the trust.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
10y
@Dhru Das@Crystal Smith A clarification; the 90 days is from the execution of the deed to the seller, until the "signing of a purchase contract that results in FHA financing". It's not 90 days until the Closing with your FHA buyer.
@Dhru Das@Crystal Smith A clarification; the 90 days is from the execution of the deed to the seller, until the "signing of a purchase contract that results in FHA financing". It's not 90 days until the Closing with your FHA buyer.
I didn't say 90 days until closing w/ your FHA buyer- I said The 90 days start from the date you closed or your closing was recorded; (i.e. when you originally purchased the property)
Rental Property Investor · West Bend, WI · Member since 2015 · 931 posts · 598 votes
10y
It wouldn't matter if its an LLC or not, what is known as "title seasoning" is problematic in FHA and many other loans. Freddie/Fannie issues come up as well, primarily when PMI is involved, so you need to stay up to date on PMI guidelines if doing short term flips, many of them have NO WAY in 90 days rule, and 90-180 days a 2 Appraisal rule, and it doesnt stop at the PMI company, some Lenders have their own internal set of guidelines on this, so one bank may be able to do it and another cant using the same secondary financing, the funny part is most loan officers have no clue what you are talking about when you try to cove this on the front end. I call the banker on the pre-approval and ask the questions, and i usually get a silence, and i will have to ask about that, or i've never heard of such a thing, but then 40 days into the 45 day contract they kill the deal based on the title vesting not being seasoned. Oh and it runs from the day you took ownership, to the day the offer was drafted not date accepted. Good Luck!!!
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
10y
@Crystal Smith You mentioned "......the average time it takes for an FHA loan to close (30 days)" made it sound like you were including this time. Many people think it's 90 days from closing to closing, just wanted to clarify.
You're asking this question was good timing for me. Yesterday I received an email on one of our deals that is threatened not to close because the title company didn't record the original purchase in a timely manner. The property was purchased in October 2015 & unbeknown to us they didn't record the purchase until a couple of weeks ago. Our attorney is fighting back using the HUD w/ the original closing date. Lesson learned- Don't assume the Title Company and/or attorney will record the sale in a timely manner. Stay on top of them.
Agent/Investor · Knoxville, TN · Member since 2015 · 59 posts · 29 votes
10y
We had this happen as well on a property we had rehabbed and were selling. No one including myself, the selling agent, title company or the buyer's lender caught it until we were a week away from closing. We ended up having to write up a new contract on the 91st day after purchase which caused the buyers to have to restart the underwriting process all over again. We did close finally fortunately, but that could have lost our buyers. Good lesson.
Professional · Allen, TX · Member since 2016 · 41 posts · 2 votes
10y
So I am trying to understand this correctly a little confused on the dates.....
I purchase house sign deed - lets say 01/01/2016, 90 days after that would be 03/31/2016
Can the buyers "FHA Buyers" put an offer in before that 90 days and they just can not close prior to 03/31/2016? or are they not supposed to make an offer at all until 04/01/2016?