bought my first house in 2017... it was my primary residence.

That home is now a rental. I want to buy another rental and have been told that if i have multiple rentals i should look into having a LLC.

I assume the LLC would be own the new rental but how would the LLC take ownership of my existing (it is not paid off yet)?

Look up doing a grant deed.

Don't do this without understanding all the risks and rewards associate with doing this. My attorney advised me to get umbrella insurance instead of transferring ownership to an LLC, which is also what he did with his properties.

So if you get sued for a property-related matter, it will be against you personally!? What happens if a coverage issue arises and your insurance company denies coverage. You are "bare" and your investment properties and your personal assets are exposed? What if a catastrophic claim arises from a property-related matter and the claim exceeds the amount of insurance coverage?

I'm assuming you are talking about what to do about an alienation/due on sale clause in your mortgage since the property isn't paid off and not just how to transfer legal title from you to an llc you own?

I think the likelihood of a good attorney piercing that veil or a lender triggering the due on sale clause is a lot greater than the likelihood of a catastrophic event occurring that exceeds all your coverage. But like I said, there are risks and rewards to both options, and he should understand those himself, not just listen to someone who isn't an attorney who thinks an LLC is an impenetrable force field.

To clarify, I'm just trying to help the OP make the best informed decision for his situation. I personally own many different real estate investments under LLC's, and some more under my own name.

Red Pear Realty said:

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Don't do this without understanding all the risks and rewards associate with doing this. My attorney advised me to get umbrella insurance instead of transferring ownership to an LLC, which is also what he did with his properties.

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Why not an LLC with CGL insurance?

Again, I'm not anti-LLC. I have lots of them. I'm anti-"LLC will solve all your problems".

Your attorney advised you to get umbrella insurance instead of transferring ownership to an LLC. Why not an LLC with CGL insurance? It seems to be the best of both worlds.

In addition to the due on sale issue, the problem with LLC's is many people treat the formation and transfer of the asset to the LLC as the solution. They then proceed to ignore the LLC in their day to day operations. They mingle bank accounts, insurance, payments, and contracts. They don't follow their operating agreements. If your doing those things the LLC is doing nothing for you.

This.

Liability/Umbrella insurance and entity formation are the foundations of an asset protection plan. As to not keeping correct records, that applies to any type of entity. If you aren't going to conduct business properly, it really doesn't matter how you are structured. That being said, a Texas LLC is rather simple to operate and keep in compliance. Having it reviewed regularly, like with personal insurance and an estate plan, is also wise.

Thanks all!

I cannot under any circumstances imagine owning this type of asset personally.

And to be clear I do own income properties. They're actually all in their own LLCs.

After much research, I decided that the negatives of forming LLCs esp doing a new LLC for each property grealy outweighs doing a large umbrella policy. Plus the umbrella covers my auto, and other personal potential issues.

Instead of separate LLCs for each property you can do a single series LLC with each property being owned by a separate series within the LLC - in theory is the same liability protection as separate LLCs but only have to manage a single entity. Series LLCs are relatively new and not that commonly used yet. Regardless, at the end of the day it is usually harder to get a mortgage for a rent house if you use any llc vs owning in your personal name.

The series LLC is an excellent concept. Texas introduced this only after I moved away. Not all states recognize them. When I get back to Texas I will be setting up a series LLC.

dc509 said:

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I cannot under any circumstances imagine owning this type of asset personally.

And to be clear I do own income properties. They're actually all in their own LLCs.

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Is your point that small rental properties just sound like the biggest pain in the ass ever?

AndesAg92 said:

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dc509 said:

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I cannot under any circumstances imagine owning this type of asset personally.

And to be clear I do own income properties. They're actually all in their own LLCs.

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Is your point that small rental properties just sound like the biggest pain in the ass ever?

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Ah, I mean that isn't really my game, but if you know what you're looking for they can be good investments. Assemble a few and do somethings to raise rents, and you could sell them together at nice premium.