Question for the gurus of rental investing. Stepping into a rental property for first time. Do I form an LLC prior or after purchasing?

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From what I understand, most banks can call your mortgage (terminate it) if you transfer to a LLC.

likehelpful

Thanks P1.

I opted to skip LLCs and get an umbrella insurance policy.. seems to be sufficient for my scenario.

If you get an LLC then I would echo what others have already said: Problem with getting before and buying In the LLC is it will probably be a higher interest rate.
If you transfer it into the LLC it could trigger a “due on sale” clause and call the mortgage due (however I have read for federally backed mortgages this clause does not exist, I.e. FHA, VA, etc.).. also I know many investors who have transferred and no issues came up with banks calling the notes due, I just personally wouldn’t take any risk especially if you have a low interest rate.
If go the LLC route you need to be intentional not to “pierce the corporate veil”, so have the LLCs own bank account and don’t mix personal/business expenses through it.. otherwise there is a chance the LLC doesn’t truly limit liability the way it is intended.

likehelpful

GT1 thankyou for the detailed response. Given the high interest rates, I am leaning towards Umbrella insurance.

Prior makes it easier, but will the bank give you the same rate?

helpful

Not sure. Will check and keep this thread posted

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Prior. The bank will make you hold title in a single purpose LLC and make the loan to that entity.

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