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LLC protection only works if it's more than just you and your spouse in the LLC. Otherwise many judges will allow a plantiff to 'pierce' the LLC and go after personal assets outside of the LLC. We went with a large umbrella policy instead. Figure if someone does come after us, the insurance companies lawyers will do a pretty good job defending me so they don't have to pay out.
As for living there, then moving out. Yes, most mortgage companies do have clauses where they can demand full payment if you change certain parameters (ie turn it into a rental). That being said, the occurrence of them using this is pretty rare (you'd default and they'd probably get less than owed). But if you have PMI, when you change your address, the insurance company will report the address change to the mortgage company.
The mortgage company would likely insist all lines of credit (debts) be closed or rolled into the new refi mortgage.
Given that its a 5-plex, more than likely they will classify this as an investment property even if you live there. I think most lenders only allow up to a 4-plex to be considered owner occupied.
IMHO lenders have gotton better about dealing with rental properties since they are much more common now. They will want copies of leases (current and possibly past) to get an idea of your vacancy rates and income.
REpro
2013 Aug 16, 3:02pm
You have one unit too much to be considered owner occupied. Only commercial mortgage is available for you. You must keep a minimum 1.25 DCR.
Turning into corporation is a bad idea for real estate.
“Acceleration clauseâ€, check your Deed of Trust, usually triggered when is change of ownership.
Hello all,
I have a rental property with five rental units. I want to refinance it to do some fixing and go invest in another property. I have a few questions that I will address with the attorney, but want to get some ideas beforehand.
Put the property under a business? I've heard to open a corporation and put the property under the corporation in case someone falls, lawsuit, write off repairs and expenses. But then I also heard, that it might not be the best option. Any comments?
Refinance it. I am going to live likely in one of the units, so I am going to refi it as owner occupied, and have a better rate / larger available equity line of credit. Do mortgages generally have a clause indicating something like an acceleration clause for payment of the mortgage if I move out and rent it? The last time I did this was years ago b4 all the real estate crazyiness... I had my mortgage on my primary residence, bought another as my primary residence, and the new mortgage company just asked for a copy of the lease of my first residence to show I had it rented. First mortgage company didn't ask to get them paid... I just kept paying the mortgage..
Also, I am guessing it's much worth my while to move into it for the better rate and better ltv as mentioned above or is it just not worth it?
I want to refinance what I owe now at a lower rate (owe about $100K, property value about $600K), and have an available line of credit out of the equity. Would that be considered or done as two seperate loans or one? What about those rates?
tks
#housing