Primary Residence to Rental

[Ashley Jones]

I am new to Real Estate investing hung up on my first course of action. My goal for this year is to buy/ hold 2-3 properties and do 1 fix/flip. I have very minimal capital to start. I have not yet purchased my first primary residence but was wondering what the laws were in TX on transferring your primary residence to an llc after closing. Would it be wise to turn my first home purchase into a rental and keep my low rent apartment. How is it that investors are able to purchase multiple homes at 1 time? Are they all purchased through an LLC or can a buyer purchase multiple homes under their name?

[Daniel Haberkost]

Originally posted by @Ashley Jones:

I am new to Real Estate investing hung up on my first course of action. My goal for this year is to buy/ hold 2-3 properties and do 1 fix/flip. I have very minimal capital to start. I have not yet purchased my first primary residence but was wondering what the laws were in TX on transferring your primary residence to an llc after closing. Would it be wise to turn my first home purchase into a rental and keep my low rent apartment. How is it that investors are able to purchase multiple homes at 1 time? Are they all purchased through an LLC or can a buyer purchase multiple homes under their name?

Generally, the issue with transferring your primary residence to an LLC after closing is with the lender. Most traditional lenders have a clause in their contract that would allow them to call the full balance of the loan due if the title is transferred out of your name. Do many investors do this anyways and not have an issue? Yes, does that guarantee that you would be able to get away with it? No. Some lenders will not take any action as long as the mortgage is paid but you would be taking a risk.

Being that you have a lack of significant capital, house-hacking is likely the most viable option for you. If you stay in your apartment and try to buy a rental (traditionally) you will need 20% down. On the other hand, if you were to do a house-hack you would only need 3.5%. 

If someone has the credit score, down payment, and debt-to-income ratio that fits conventional standards then they will be able to buy multiple properties personally at once. As long as they don't exceed a certain threshold of debt-income they can continue to get mortgages (up to 10). Some investors buy through an LLC with commercial financing but that still requires examination of one's personal financial situation.

Hope that helps!

-Dan