LLC

[Jaime Botello]

hello,

I currently have two rental properties and I would like to set up an LLC to which I can transfer both properties via a quit claim deed. I have heard that in some cases the bank asks for the loan balance to be due in full once the transfer has been made. Does anyone have any experience with this situation and can you please let me know if this is the case?

[Jesse Waters]

I have transferred all my deeds from my personal name to my LLC. When I purchased the properties I told the loan officer that I was going to do this, they didn't seem to mind, since it is an entity that I own. Check with your insurance company to see if you will be subject to a rate change. My insurance company didn't change the rates, they just added the LLC as an additional insured.

From my understanding, the bank's don't get too wrapped up on this since A: they are still in first lien position on the property, B: you still hold the mortgage and C: They can foreclose on the property if you quit paying.

I would ask anyone that knows anything more to let me know if I am off basis.

[Agnes Jacquet]

@Jesse 

@Jesse Watersundefined

Catching up on posts related to LLCs and insurance. My insurance company would not add an LLC as an insured. What is your insurance company?

[Michael Boyer]

agnes, you are wise to read up on all the forums on this perennial topic...it can work well for some cases but create unintended consequences in others as your are already seeing ..I won't rehash all the forums chock full with good points on all sides, but a search of due on sale or llc, etc can be instructive.... 

Maybe nowhere on the Internet are there more views and opinions on this topic than  bp...there is also a large group that goes with landlord policy and an umbrella for encumbered residential rentals, too....best of luck..

[Lee Liberman]

@Jesse Watersanother post noted that you would not be covered by adding an additional insured (the LLC) but rather you will need a separate business policy (one in the name of the LLC rather than personal) in order to have protection in the event of a claim.

[Pauline Charlton]

I am in the process of changing to an LLC and the insurance companies would not add the LLC. My attorney advised me to go with what they are asking and get a new policy but ensure the loss payee requirements were viable.

I looked on the BP site for advice on insurance for flips and rentals and it was very helpful. So I am looking into an umbrella policy .

[Jason Bott]

@Pauline Charlton if your current insurance company will not allow the LLC on the policy, it's more of a personal lines company. If the title has changed to an LLC, you should find an insurance company that is set up for commercial, so that you can list the LLC as the Named insured, not just as an Addiditonal Insured.

[Pauline Charlton]

@JasonBott  one company will only cover the rental but not the flip. 

I have heard of companies that will provide coverage to the LLC so that properties can be added or removed without making a separate policy. However the agent who is providing coverage for the rental tells me it may become a problem with the mortgagee because they want to see a policy for the property they are funding.