patrick.net

@SFace ~ Thanks for the reply.

Some Facts that hopefully will paint a better picture.

I've been saving for most my professional life ~11 years, never having bought real estate. After getting married last July I just experienced my first tax returns filled as a married couple, and they were 5X what I normally receive (no big changes in my income/investments). My tax person suggested that I might look into picking up some RE after reviewing my various positions. He went through a couple of models and I was surprised at how my returns would have been impacted (positively). My main motivation is not an improved returns, this just made the idea of owning some RE more realistic and within reach.

I've been looking at RE for a number of years, mostly on the outside, and always interested in a multi-family where I could live and still collect income to help offset the mortgage.

There are a few targets that I'm looking at and thought that it might be a good idea to explore various ways to purchase them with the key motivation (right or wrong) to protect my personal assets as best as possible, at was settling towards an LLC.

So, looking forward to starting a family, and being shown that owning RE is not as out of reach as I once thought, now seemed like a good time to see what was out there.

Questions:

If you purchase a home as an individual can you convert the title over to an LLC down the line, are there costs associated with that?

A couple of the opportunities have commercial space on the ground floor. If I opened up a business downstairs, does this point more towards purchasing the building under an LLC?

One property is being sold as is, with no inspections done..and are disclosing a sewer lateral compliance cost estimated at $4,800. The selling agent has provided a disclosure document. This is setting off red flags for me as a potential pit or problems. Would you typically agree to purchasing a home without an inspection?

Thanks in advance,

@gbenson
Thanks, this is some great feedback. I'll look into umbrella insurance a bit more.

OnTheFence says

If you purchase a home as an individual can you convert the title over to an LLC down the line, are there costs associated with that?

Just title, or title and mortgage? If the latter and you consider the lien holder calling in the mortgage a 'cost', then yes. You would be in violation of the terms of your mortgage and the bank could ask you to pay the mortgage in full or lose the property. The reason for it (as I understand it) is that it screws up the underwriting of the loan, so in essence, allowing it puts the bank's securitization of the loan in jeopardy. If you ask, they are guaranteed to say no or raise your rates and tack on all sorts of fees to reclassify the loan.

I know people who have done this and gotton away with it (during the hayday when nobody was looking) but its too risky now with banks being more cautious. You can move the title of the property over pretty easily and the bank won't get wind of it, but once you try and move the mortgage and any insurance, then the bank would be hard pressed not to see what you are trying to do and come after you.

On the flip side, if you moved the title, but not the mortgage, then per my earlier post, your LLC is no longer distinctly separate. You just negated the integrity of your LLC and might as well not have it at all.

The LLC is more for partnerships involved in multiple properties, or transaction that may have high equity positions.

Like if uncle Mort was going to help you finance the property he may get more protection out of an LLC. Now imagine you have a group of partners building a portfolio, the properties you all own may be worth millions, so you want to protect that.

That millions in equity may get you a better rate from a lender, I don't mean a bank, but an investor lender. Some banks may be coming back around, but they got pretty hammered by LLCs after the crash.

You are better off playing it straight, and getting the best insurance agent you can find. Get a good policy, and keep it up dated as you improve the property.

Get a personal residence loan. You're entitled to it from what you describe.

As far as a property that doesn't allow for an inspection, that's just BS. You should at least be able to figure the costs before you make an offer. Have you asked to see the property inside, and out?

Take a contractor buddy with you, and figure the sewer is shot out to the street. You can make your offer based on what you think it's worth minus the needed repairs.