Personal Risk When Taking a Personal Loan

[Tony Guard]

I'm buying 2 duplexes and I'm looking at both personal and commercial loans as options. I have done several commercial and residential investments prior and have always done them through my corporate structure. I realize taking a personal loan out provides a lot of financial benefits (longer loan terms, lower interest rate, etc) however, my concern revolves around the personal risk of liability. I have a current personal umbrella policy which will definitely help... If you have researched this area or have knowledge, I would love to get your experience and position on the subject. It seems one has a better financial option while the other reduces liability exposure. I understand all of the details and limitations on personal loans (as in you can only loan from single family to a quadplex through a personal note... larger is always commercial) as well as commercial. It's the personal liability that makes me nervous.

[Tyler Rasmussen]

When I talked to my banker and attorney, what they recommended is to buy it in my personal name to reap the benefits of a better loan structure, then do a quitclaim deed into an LLC name. I've verified with the bank that they won't call the loan due when I shift the deed, and the quitclaim deed is pretty cheap in the state of Iowa. That way you reap the benefits of the loan terms, plus you eventually get the coverage of an LLC!