Forming an LLC to use to "house" rental property

[Anonymous]

Hello DCUM real estate experts.

My DH and I are interested in keeping our current house as a rental (buying a bigger house now). We'd like to maintain our current home as a rental but I just don't know where to begin. Any advice on where to look/what to read when it comes to the best way to do this? I appreciate it!

[Anonymous]

Location?

[Anonymous]

Do you just want to transfer your current house to an LLC once you start renting it?

If that’s the case and you own it free and clear, that’s perfectly fine and very easy for an attorney to handle. If you have a mortgage, you can still do the transfer, but there is something called a due on sale clause and the mortgagor could call it due. They would mainly do this if you currently have a low interest rate because they know they can lend the money at a higher rate.

I would consider just holding in your personal name and getting a large umbrella policy for about 1,500 per year for 10 million policy.

Feel free to post any more questions and I’ll try to help.

[Anonymous]

Agree with PP on the umbrella policy. We’ve got a rental duplex in FL and the best protection is having a personal umbrella policy. We did $5M but woulda gone higher if we were renting in a litigious area like DC.

[Anonymous]

Why do they need an umbrella policy?

[Anonymous]

Anonymous wrote:Why do they need an umbrella policy?

In case something really bad happens.

Putting your house in an LLC makes homeowners insurance and title insurance more difficult to get and more expensive.

[Anonymous]

Anonymous wrote:Why do they need an umbrella policy?

You don’t want wages being garnished over being sued by someone who rented from you and somehow got hurt etc

[Anonymous]

Anonymous wrote:

Anonymous wrote:Why do they need an umbrella policy?

You don’t want wages being garnished over being sued by someone who rented from you and somehow got hurt etc

My family member was killed by a distracted driver and they tried to sue. The driver and another responsible party found guilty declared bankruptcy and there was nothing to collect even though one of them owned a home and another one owned a business.

[Anonymous]

Anonymous wrote:Do you just want to transfer your current house to an LLC once you start renting it?

If that’s the case and you own it free and clear, that’s perfectly fine and very easy for an attorney to handle. If you have a mortgage, you can still do the transfer, but there is something called a due on sale clause and the mortgagor could call it due. They would mainly do this if you currently have a low interest rate because they know they can lend the money at a higher rate.

I would consider just holding in your personal name and getting a large umbrella policy for about 1,500 per year for 10 million policy.

Feel free to post any more questions and I’ll try to help.

Umbrella policies have limitations on how many properties you own, it's not a lot and it includes your primary home and vacation home (if you have one) too. They also may require OP to get a landlord policy anyway and only then umbrella policy kicks in. It is not meant to be primary insurance, just something to augment your primary insurance.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Do you just want to transfer your current house to an LLC once you start renting it?

If that’s the case and you own it free and clear, that’s perfectly fine and very easy for an attorney to handle. If you have a mortgage, you can still do the transfer, but there is something called a due on sale clause and the mortgagor could call it due. They would mainly do this if you currently have a low interest rate because they know they can lend the money at a higher rate.

I would consider just holding in your personal name and getting a large umbrella policy for about 1,500 per year for 10 million policy.

Feel free to post any more questions and I’ll try to help.

Umbrella policies have limitations on how many properties you own, it's not a lot and it includes your primary home and vacation home (if you have one) too. They also may require OP to get a landlord policy anyway and only then umbrella policy kicks in. It is not meant to be primary insurance, just something to augment your primary insurance.

Of course OP should have a landlord policy, the umbrella policy supplements that. The first basic umbrella policy we had covered our home, summer house and several investment properties. When we got to six we had to get a larger one.