All Forum Posts by: Will Jayne

@Dean Carter No I looked over the whole thing and don't see anything that specifically references transferring to an LLC. I assumed that might be covered under the due on sale clause if they viewed the transfer as a sale?

@Joe Splitrock @Jonathan Pavkov @David M. thank you for those last remarks, that hit the nail on the head for what I was concerned about. Transferring to LLC after closing as a common practice is what my lender told me but I wanted to hear it from investors rather than the person trying to sell me the mortgage.

Since the insurance market is the main issue I am having now, I think what I am going to do is just bind the one policy I can get so that we can close. Then, make the necessary repairs afterward closing and see if I can get an insurance company willing to write a policy insuring the property with the LLC as the named insured. If I can get that done, we will then transfer the property into the LLC and do a cancel rewrite to get rid of the first insurance policy since that would only have us personally listed as the insureds and then bind the new policy that has us and the LLC listed. That will keep the lender happy since we are still named and then we would have the LLC on the property with an insurance policy listing the LLC as an insured.

Thanks to everyone who chimed in! I think we have a good course of action now with a plan A & B. 

@Joe Splitrock Correct on our current net worth part, but fortunately we have no debt other than our primary mortgage. The LLC isn't for the house hack, but for our second house we have under contract that is going to be 100% rental. We also have a pretty high income which is why I am focusing on the liability side so much. I do work in commercial insurance so I admit I do tend to overthink the liability side of things. If it turns out we can't get an insurance carrier willing to write the policy if the property is held in an LLC, we will just make sure we get an umbrella policy with high limits to cover us. I will discuss with our insurance agent to make sure it would sit over our homeowners, landlord, auto policies, etc.

@Jonathan Pavkov I have made my lender aware that we plan to transfer to an LLC after closing and they said it wouldn't be an issue, they just don't have anything in the actual wording that says its okay. I was thinking the best move is to just get through closing being as clear with our intentions as possible and then worst case we have to refinance later if any issues come up. We anticipate being long term holders so if immediate cash flow gets cut down we are okay with that since we are in it for the long game.

Thank you both for your advice. 

Thank you everyone for your input. Mike, this is my true "first deal" so I while I may be coming off as paranoid, I am only trying to learn while making as few mistakes as possible. 

David, thanks for the input. I have 3 independent insurance agents and a CPA working with me to put this together the right way. The issue here in Florida is the insurance market. The property needs some tlc which is why it's a good deal but the small things that need to be fixed have made it "undesirable" to the 2-3 carriers that are left in this area willing to write rental properties. Here is my plan now since the cash flow on this is worth sticking it out and making the deal work. 

Since the ONLY insurance carrier currently willing to write this property is the government backed carrier who will only write it if it is in our personal names, we keep it in our names for now so that we can get through closing. Then, make the necessary renovations and get a secondary inspection so that we are eligible for coverage by another carrier that will add the LLC as an additional insured. At that point we would quit claim to the LLC, cancel the government insurance, and write a new policy with a new carrier that lists the LLC as a Named Insured. That would leave the property in the LLC and the insurance would lists the LLC as an insured.

What I meant by "umbrella policy for ourselves" was that if we have to keep the property in our names and couldn't transfer it into the LLC, we would have extra liability coverage since the property and the policy would both be in our names.

For the lending piece, it seems like I shouldn't be worried about transferring to the LLC because if they do at some point enforce the due on sale clause, I can just refinance with commercial lending and pay the higher interest rate. Is that what you are saying too?

I plan on building a real estate portfolio so I fully anticipate this first deal to be a learning experience with many mistakes made along the way. I am just trying to mitigate any serious losses as best I can while doing it. My biggest fear is that we micro analyze every potential risk to the point that we scare ourselves out of ever jumping in. Id rather suffer through mistakes than play life so safe that we never end up living. 

That makes a lot of sense, I hadn’t thought of that angle. I appreciate the insight. 

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!