Transferring To LLC After Closing - Single Family Dwelling

[Will Jayne]

Hey there everyone! This is my first BP post since my wife and I are new to real estate investing. We are located in East coast central Florida. We bought our first house last year after finishing college and are now house hacking but we saved up over the past year and are now 16 days out from closing on our first true rental property. 

Issues that have come up: 

1. Both our lender and accountant advised buying the property in our name and then, after closing transfer the deed to an LLC. The lender said this was fine, but that there wouldn't be any wording on the disclosures specifically stating that the transfer would be allowed. This makes me nervous that they will change the loan terms once we transfer to the LLC after closing. Is this a normal practice and I should stop worrying? I have an email from the loan officer saying it would be fine but nothing is stated on the actual documents.

2. Insurance in FL has gotten crazy and the only quote I can get is from the subsidized government program, but they cant quote if the property is in an LLC. In fact, none of the companies from 3 separate agents could help if the property was in an LLC. If we have to keep the property in our names for the time being until the insurance market changes, is that an okay option? The insurance quote we have only offers $100k liability limits but we are getting an umbrella policy for ourselves soon.

3. The property is in good shape but needs some TLC which we plan to do over the course of a few weekends before posting it for rent. The little items that we are planning on fixing have caused the insurance companies to decline quoting. Small things like the on/off valves under the sink look dated, even though the inspector said they were in good working order. The seller just wants to offload the property as is so they aren't willing to make any changes prior to the sale which has severely limited our insurance options. What do you all do in the situation? 

I appreciate any ideas or wisdom you may have! 

[James Palassis]

I transitioned from buying in the LLC to buying personally to get better financing. Although your lender can say they would not exercise the due-on-sale clause, without something in writing, that's meaningless. The reason I am choosing to hold title personally (with a large umbrella insurance policy) and not transfer over is because, looking through the bank's eyes, if interest rates go up significantly, I would want to force all those paying super low interest rates into higher interest loans.

If you are paying 3%, but in 5 years the going rate is 7%, they could call the note due and you'd be stuck having to refi into a 7% loan (or if you chose to keep holding in the LLC, you'd need to do a commercial loan, which means higher rates and/or shorter terms).

I know "everybody does it," but I just feel better keeping it personally. I have 7 loans with the same lender. Transferring them to the LLC and getting them called would reek havoc for me.