Closing on 1st Rental - Refinancing and moving Deed to LLC

[Matt Holley]

I am closing on my first rental in two weeks. It is a single family middle unit townhome. Total mortgage payment (including taxes and insurance) will be approx. $1,850.00, the rent goes for $2,400-$2,500 a month, and the tenants pay for utilities. The property just appraised for 30k more than I am paying for it. I want to take some of my initial investment out so that I can reinvest it in the purchase of another property in the same area. I also would like to move the Deed to my LLC.

Question 1:

Should I do a cash out refinance or apply for a second loan on the property to get back $40,000 of my initial investment? I have a rate of 6.875% now but it is in my name and not the LLC.

Question 2:

Should I make my LLC the landlord on the lease, and how long should I wait to transfer the property to the LLC?

The two questions might be answered with one "Wait 6 months to establish the income from the lease and then do a cash out refinance as long as your cash flow from the property is still positive with the new mortgage payment." (That is what I think the answer is but I legit have no idea)

Thanking you in advance for any assistance!

[Jason Marino]

Hi Matt,

I am replying to something that you mentioned in your second question. The strongest asset protection structures usually use a multiple entity structure. This would include using an LLC that you establish as an Operating Company as the landlord or rental manager listed on the lease. This entity would additionally interact with contractors and be your publicly facing LLC. The purpose of this is to separate the liability of interacting from the liability of owning the property. A separate LLC or other limited liability entity would act as a Holding Company and be on the title to the property.