How to Purchase 1st Investment Property With LLC - Posted by Anthony (CA)

Posted by george on March 14, 2006 at 18:28:38:

Huh? That’s not exactly what I said, or a valid formula.

Here’s the way things work in real life: Suppose your tenant is seriously injured in your property. He sues. You don’t get a choice to say, “sue my LLC, not me”. Both you and your LLC will be named respondents.

You go to court and are found liable for $5mm. The amount is almost irrelevant. After the suit, opposing attorney wants to know the limits of your umbrella policy. Say it’s $1mm. Assuming you have no fat bank accounts or free and clear properties, how much do you think they will agree to settle for?

You guessed it. $1mm. Once your insurance co. pays, the judgement is satisfied, and your financial and credit rating is as though the lawsuit had never existed.

The LLC did nothing to protect you.

george

How to Purchase 1st Investment Property With LLC - Posted by Anthony (CA)

Posted by Anthony (CA) on March 13, 2006 at 15:33:22:

Hello,
I keep hearing that lenders will not allow one to apply for a mortgage using an LLC. If that’s the case, what can be done to change the title to the LLC without having to pay transfer taxes?

-Anthony

certain lenders - Posted by lukeNC

Posted by lukeNC on March 14, 2006 at 07:39:38:

certain lenders will allow this, but usually only on income property.

How to Purchase 1st Investment Property With LLC - Posted by george

Posted by george on March 13, 2006 at 18:54:06:

What you are hearing is that lenders lend money to individuals, not new entities.

At closing, you can ask that the deed be in the LLC’s name through you. The lender simply wants a person to look to if the payments are not made.

BTW, if you are a new investor, are you sure you want to use an LLC? Check this out, it could be good or a big mistake, depending on your present financial situation.

george

Re: LLC - Posted by jc

Posted by jc on March 14, 2006 at 10:49:42:

George,
Can you elaborate on bads and goods on LLC?

Re: LLC - Posted by george

Posted by george on March 14, 2006 at 15:57:03:

Well, you have to go the expense and trouble, plus the records in keeping it active.

But what do you have to protect? Judges normally won’t touch your homestead or IRA. Do you have huge other assets you were foolish enough to not hide in a trust?

A good umbrella policy will cover up to 3 million. Do you have big naked assets beyond that?

In many states, if a tenant takes you to small claims court on a $500 suit, you will be required to be represented by an attorney since you are a LLC. Maybe cost you $2k. So even if you win, you lose.

I could go on with other negatives. It’s amazing that most newbies aren’t really told the whole truth when their gurus are peddling the asset protection courses.

george

Re: LLC - Posted by james

Posted by james on March 14, 2006 at 16:16:20:

Thanks George for the great info!

Rule of thumb( more or less): 3 mil or less get an insurance(particularily for newbie), more than 3 mil get LLC correct? What about other major lawsuit like tenant get hurt bad or even worst die in your prop., will this have disastrous effect on your finance without LLC?