All Forum Posts by: Paige Bostic

 Hello.  Sounds like you should definitely speak to a RE attorney before starting on this particular investment venture.  

House hacking means that you are really going to live there. It used to be at least 2 years minimum. You would have to check into the current requirements for occupying the property. FHA is SUPER picky and they would not go for the LLC.

All this being said---I am an Indiana Real Estate Broker and we cannot give legal advise.  Just suggestions on seeking out legal advise :-)

Regarding this statement: "If you are paying, the servicer doesn't really care.", I heard on Clint Coons Esq Youtube channel that sometimes the lenders get audited by their insurers and if it is found that title is not being held in their name, then the lender will call due all loans made out to you. Although you're probably right, this maybe happening only rarely, but make sure that if it does happen, it doesn't end you real estate investing journey. Set yourself up for success! =) Best luck

@Paige Bostic, you ask a common question and one which a lot of people have opinions about.  Depending on your plans for future investments, I recommend you speak with an attorney and CPA who are experienced in real estate.  Use information which others offer on BP to ask professionals so you can understand the pros and cons of different approaches.

Both David and Kevin have some good thoughts to consider and ask of professionals.  I am not a legal or accounting professional, but let me give you some things to think about and ask of professionals.

Many times people invest in their name personally, thinking of saving paperwork or a few dollars or not thinking about liability issues.  I would never do that, but I don't buy small, single residential properties as David and Kevin are talking about.  The benefits are, IMO, negligible compared to the risks.  With properties held in your name, you are personally liable in case something happens at one of your properties to cause a claim against you.  Not only that, if the litigation attorney is aggressive and looking for more money, all of the properties held in your name are exposed to them.  Conversely, and what people frequently don't think about, is if something you or a child of yours causes an accident or similar situation puts you at liability, then a litigious plaintiff can bring a suit against you and all of your properties held in your name.  It happens every day.

The decision is yours, but you should make the decision recognizing the risks of different actions.  Each person's situation has nuances which a professional will ask about and be sure to consider.

You can quickly learn more by watching the video below.  Anderson Advisors is a legal and accounting firm which has a large number of YouTube videos which explain many different ways to structure and grow investment portfolios.  Look on YT for videos by Toby Mathis, Clint Coons and Michael Bowman who are the three partners of Anderson.  They are nationwide professionals who invest in real estate so they are experts in just the topic you are asking about.  And they complete 1,000s of tax returns every year.  If you want to know more, I'll be glad to give you a contact there.  Let me know.

@Paige Bostic

You need to poke around BP a little more, this is asked all the time and your situation specifically just came up a few times.  For starters, take a look at this thread:  https://www.biggerpockets.com/...

Especially when starting out LLC's can be really oversold. Just have landlord/owners's insurance and perhaps an umbrella liability policy asyou get more assets. Its your choice if you want the LLC, but otherwise, here is why:

First, there are NO tax or accounting advantages with investing with a legal entity such as a LLC unless you are investing with a nonspousal partner. Next, legal entities are not eligible for conforming residential loans such as FHA or conventional loans. You need to get commercial financing which is generally much more expensive --- this is where the main additional expenses comes into play. Also, you need to operate the LLC correctly, especially avoiding co-mingling of funds and using it as your alter-ego. Quit claiming deeding the property to the LLC in my layman's opinion can become to look like using it as your alter-ego. You have to consider the LLC as a stranger. For example, if you quit claim deeded the property to me and found out about it, I'd sell the property and run with the proceeds. I certainly wouldn't pay YOUR mortgage (which can become co-mingling in your case) and rent out the property and handover the rent. Also, if you want the limited liability afforded by the LLC, you really should have everything under its name --- again, operate it properly. Also, its generally not advisable to hold your primary residence in a legal entity as a LLC.

To get started, unless you have some special circumstances or are really uncomfortable, just use your own name.  Lots of investors do it just fine with residential properties.  BP posts have many people with more than 10 properties in their name, and some with more than 20, 30 and even 50!!  Try out investing and being a landlord.  Understand what it takes to do your bookkeeping / accounting.  Find out how the finances really work, or at least how you end up every year.

I don't have any assets in TX.  However, I use a larger accounting firm that pretty much handles anything. So, especially if you expand (either in other states or just into different business areas) they can have you covered.  Let me know if you want a referral.  And, i'd be happy to chat if you'd like, just send me a message.  Good luck.

Hi @Paige Bostic, to answer your first question--you cannot purchase a property with an FHA loan in the name of an LLC. It's also quite risky to try transferring it to the LLC post-closing as this could breach your mortgage contract and cause the lender to enforce the "Due-on-Sale" clause--basically, this allows a lender to immediately call due the entire balance of the loan if an unauthorized transfer is made or certain other conditions are breached.

@Paige Bostic Figure out what your criteria is. Do you want to cash flow while living in the property? How much do you want to cash flow when you move out? Do you want high appreciation? Do you want a low cost of entry? Do you want to be in a really nice area? Are you going to live with roommates? Are you going to use an FHA loan or a conventional loan? What is your max preapproval? By getting as specific as possible, you can get the right deal. To be a successful investor, you need to get picky so that you know what a good deal is to you when it comes on the market.

Paige, I would be sure to look at comps in either of these cities and would encourage you to do your research and look for an area that is growing and will provide you the best ROI. Good luck!

Hi @Paige Bostic, congratulations on taking the leap into house hacking!

It is certainly a great tool on the path to financial freedom, however, it does have its shortcomings.

The biggest one is that you are now a property manager. 

Now you have to deal with the three Ts.

Make sure that you are prepared to deal with maintenance issues and tenants before you take the plunge. 

If you are ready to do so, then start looking for properties!

Hope this helps! Let me know if I can be of any assistance.