1st STR Under Contract -- Direction Please?

[Chad Bourque]

Hi all,

Our offer was just accepted for a condo on the beach in Miramar Beach, FL! This is our first foray into REI aside from our primary home (which while it technically is, I guess, I don't really consider REI). My understanding is that I will want to set up a Florida LLC to hold this property. Then, possibly set up another LLC (in another state) to hold the FL LLC. Is that needed and/or useful? I'm taking out a personal mortgage for the property. Should the property go into my name at closing, then later transfer into the LLC? Or should I have the LLC set up and title directly into the LLC at closing? Does it matter? Since I'm just getting started in this realm, I'm also needing to "build my team", so if you have recommendations, please send them my way. I'm not sure what other information is needed or helpful for you to provide guidance and recommendations, so just let me know if you need more info to provide useful responses.

Thanks,
Chad

[Michael Baum]

Hey @Chad Bourque, I feel that they aren't being 100% accurate on that. You can do it the quit claim to the LLC, but like @Sunny Alexander said, it will most likely trigger the due on sale clause. That will require you to refinance the loan to a commercial product. Usually including a higher interest rate and more down.

I wouldn't expect any lender allowing a transfer of the asset without the loan would leave them hanging out in the wind.

Now, I don't think there is a real reason to do an LLC in this instance. What you are talking about is a series LLC. A parent LLC holding multiple secondary LLC's is a good idea if you have a bunch of properties.

Just get good STR policy and an umbrella that protects you in case of a problem.