I have finally saved up enough to acquire my first rental property and I was wondering if anyone has a checklist/process flow of steps they'd be willing to share on how to go about this. What I mean is I am sure there are certain things I need to do before others such as opening an LLC before purchasing the property or speaking with a bank before putting in an offer. I have a step-by-step type of mind and I just want to make sure I don't miss something.
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
7y
@Adam L. That's one of the most debated topics here on BP. My attorney advised "no", because it violates the "due on sale" clause most mortgages contain.
When the bank finds out you transferred title (they will find out, because you'll have to switch your insurance policy and the insurance company will notify the bank), the bank has a right to call the loan in. It's unlikely it would be called, but it is a risk. There are other expenses and paperwork for an LLC too.
The recommendation I received is to get a good umbrella policy. You can get a $2M policy for about $500 pr year. Also run a good rental business. I've been in the business for about 15 years, I treat my tenants well and address any property maintenance issues in a timely matter. I've never been sued or even threatened with a suit.
Rental Property Investor · Miami, FL · Member since 2017 · 2k+ posts · 911 votes
7y
Adam.
Are you planning on financing this rental property purchase? If so then you do not have to worry about setting up and LLC as you will have to buy the property in your personal name in order to get conventional financing.
You can look for banks now or you can look for banks when you find a property. It doesn't really matter. If you have good W2 income then you can talk to some of the national banks. They will give pretty good terms.
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
7y
@Adam L. Congrats on moving forward with your first investment property purchase. I would get a pre-approval from a bank first, since you'll probably have to submit it with your offer. As Antoine mentioned, conventional lenders don't lend to LLC's, so I wouldn't worry about that now.
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
7y
@Adam L. That's one of the most debated topics here on BP. My attorney advised "no", because it violates the "due on sale" clause most mortgages contain.
When the bank finds out you transferred title (they will find out, because you'll have to switch your insurance policy and the insurance company will notify the bank), the bank has a right to call the loan in. It's unlikely it would be called, but it is a risk. There are other expenses and paperwork for an LLC too.
The recommendation I received is to get a good umbrella policy. You can get a $2M policy for about $500 pr year. Also run a good rental business. I've been in the business for about 15 years, I treat my tenants well and address any property maintenance issues in a timely matter. I've never been sued or even threatened with a suit.