North Austin Rental [SFR, Local Lenders, due-on-sale]

[Sho Asod]

Hi, I'm new to Austin real estate and was hoping to get some insight from the group about investor friendly local lenders. I'm looking at purchasing some real estate under my name with a consideration to have this transferred under an LLC in the future. The hope is that I can secure a better terms now and added liability protection via an LLC later.

I know that such transfer will likely trigger a due-on-sale clause with some lenders which I would like to avoid. I also know that I can purchase an umbrella policy to increase my liability instead of going the LLC route, I would just like to keep my options open.

I would appreciate any input on:
- How investors in the area currently make their rental purchases (directly under their name, LLC or start with personal then transfer to an LLC)

- Potential options or questions I might not be thinking about

Thanks!

[T. Alan Ceshker]

@Sho Asod Lenders do not know or care if their collateral is conveyed to an entity.  This is somewhat similar to a wrap in theory and lenders are even rarely concerned about this type conveyance - much less one that is a conveyance to an entity that is still controlled by their borrower. 

We simply draft a deed from individual to entity and the cost is minimal.  And, if there is an issue raised by the lender (which has never occurred for us), the fix is simple -- just deed it back to the borrower.  If a lender sends notice of default of the due on sale clause, you have 20 days to cure -- ie just deed it back to the named borrower.  The risk is zero.