LLC or umbrella policy

[Tiffany Smith]

My husband and I have just bought our second rental property. We plan to purchase more in the near future, and we are trying to protect our personal assets if something were to go wrong and we were sued. I have read that banks do not like to loan to LLCs and if you transfer the property to an LLC the bank can call the note due early. Is this true and can an umbrella policy be just as good and cost effective as an LLC ?

[Marcel Theisen]

Hi Tiffany, I don't think there is really a right or wrong answer. It comes up a lot on the forums and I've seen valid explanations for each side. I think the best option is to read up on both pros and cons and speak to a lawyer for advice but ultimately it will be a decision based on your personal scenario and comfort level. I decided not to put my property into an LLC because issues with lender and potential for Due on Sale clause. Instead, I put it in my name and got 3M umbrella policy. I'm sure lots of others on BP with more experience can weigh in but thought I would share my thoughts and here are a few articles that might help:

5 Reasons I Do NOT Invest in Real Estate Using An LLC

Yes, You Absolutely SHOULD Use an LLC to Invest in Real Estate: A Counterargument