Primary residence to rental property

[Joseph Tolliver]

Hello,

I am currently deployed with the military. My wife insisted we move back home to Illinios. Our house in ohio isnt selling. I decided to become a landlord. I have a property manager in place to oversee the property. There isnt any equity in the home. I think the loan is just now getting down to the home value. Rental income should cover the expenses but not much profit will be made.

I have alot of questions but I will start with these:

Should I place this house into an Entity such as an LLC for legal protection? If so, how should i go about transferring it from my name to the new entity? Is it as simple as signing the deed over to entity and filing with the county recorder?

What insurance should I convert to? Basic landlord/rental dwelling insurance or should i add extra insurance or some sort?

Any other hints tips or advise for a soon to be first time landlord?

Thank you in advance

[Matt Motil]

Hi @Joseph Tolliver, you don't have a relative in the PHX area named Jody do you? 

Anyway, welcome to BP, we are here to help! 

Some will tell you to get enough insurance and you'll be fine, others will tell you that you need to transfer to a protected entity like an LLC to protect your personal assets. You need to decide what makes the most sense for you. Some people don't have a lot of personal assets, so the asset protection aspect does nothing for them and it's a waste of effort, time and money. I personally would suggest the LLC and it's a simple as transferring title. Make sure once the LLC is setup, you transfer title, then call your insurance company and add the LLC as an additional insured. Should be all you need. Some people will tell you that you might trigger the Due on Sale Clause that most likely exists in your mortgage terms, but this hardly ever happens, especially following the steps I just outlined.

I would suggest you convert your homeowners policy to a landlord policy and get an umbrella policy (they are cheap) that will add an additional layer of protection. Make sure your renters all get renters insurance, as your landlord policy will not cover all of their stuff in your house.