* Reasons to Transfer Homes to LLC? Help please

[CatDaddy]

  I currently own a few SFH rentals and 1 personal home.  and I helped with a substantial amount down to purchase one as a rental for my S/O who may well end up as my Legal wife soon.

That house is titled in her name,  the 2 others in mine.  To protect us both for a number of reasons *Should we consider transfer title of the homes to an LLC? What protection would that afford us?   What might the cost be $$?

 Would that give us protection of liability from the outside... Maybe even from each other in the event of marraige/divorce... I am not clear on the use of an LLC other than to separate the liability holdings from personal assets.

Thanks for clarifying -

[fadi]

I am not a lawyer, but will give you what I know.

The first issue you will have is that your lender will not allow you to transfer the title into an LLC. You could do it beind their back, but that is your call.

Setting up an LLC could run you from $500 to $1500 depending on your state fees and such.

LLCs, depending on how they are formed, and if you keep meeting notes or not, can still be included in a lawsuit. Just having an LLC doesn't really protect you. You have to run it as a company.

In case of divorce, you both own a company that owns houses. It goes down to an agreement to resolve it, one selling his interest to the other, or judge order.

[CatDaddy]

 Thank you for your insight... 
  IF I understand you correctly, If the lender buys off on it, the protection the LLC
offers may well be a moot point in some cases.

[BLL]

LLC cannot own a personal residence. It will be treated as if you still owned it in your own name. Trusts are a better way to hold and and protect personal assets.

The problem with LLCs for rental property is that managing them and taking an active part in the operation of the business create an easy way around the LLC if you are the one whose actions caused an injury. They can be very handy if you own it with non-spouse members or use  a PM firm to manage the rentals.

Fadi brings up good information on costs and the bank. Additionally, you will have annual fees to the state, registered agent fees and may need a lawyer to represent the LLC in court.

All deals are off in a divorce. There won't even be a need to buy out one spouse. The judge will simply award the LLC membership interest to the other spouse.

[John_in_NC]

BLL,

How would you take title to a low income apartment???? I'm not scared of my tenants, just the legal aid losers.

John

[BLL]

Legal aid losers don't have the resources to win an excess judgment. Typical slip and fall and other claims they usually take settle for the insurance limits. You would have to do something incredibly stupid to expose yourself to a multi-million dollar judgment and, at that point, the DIY and guru plans fall apart when challenged. The real question is do you have the $30K to set it up properly and the 50-100K to defend yourself? Are you even willing to spend the money? Are you willing to spend the time and effort to make sure your plan is updated every year to reflect new case law and legislation?

[HoldAndBuy]

So BLL, do you recommend just owning properties under your own name? Or is there a third, less expensive option than LLC?

Legal aid losers don't have the resources to win an excess judgment. Typical slip and fall and other claims they usually take settle for the insurance limits. You would have to do something incredibly stupid to expose yourself to a multi-million dollar judgment and, at that point, the DIY and guru plans fall apart when challenged. The real question is do you have the $30K to set it up properly and the 50-100K to defend yourself? Are you even willing to spend the money? Are you willing to spend the time and effort to make sure your plan is updated every year to reflect new case law and legislation?

[John_in_NC]

Thanks BLL, I was thinking the same thing. I just don't see the reason to spend that much $$$ on something that is useless anyways. Everyone is telling me i'm crazy for owning low income apartments in my own name.

[BLL]

So BLL, do you recommend just owning properties under your own name? Or is there a third, less expensive option than LLC?

An LLC is just a tool. I recommend it be used with other tools to create a comprehensive system that meets the needs of the individual. An LLC used for asset protection like the way most people use them is pretty useless.

[HoldAndBuy]

I guess what I'm asking is if a newbie with a small number of low value properties needs to bother with LLC?

So BLL, do you recommend just owning properties under your own name? Or is there a third, less expensive option than LLC?

An LLC is just a tool. I recommend it be used with other tools to create a comprehensive system that meets the needs of the individual. An LLC used for asset protection like the way most people use them is pretty useless.

[BLL]

I guess what I'm asking is if a newbie with a small number of low value properties needs to bother with LLC?

Not really. Insurance is more cost effective for the typical investor.

[yrush2000]

An LLC will also give you more tax advantages.  I would not own an investment property not in one of my LLCs.  Since everyone has different needs, I recommend sitting down with a CPA and lawyer to see what fits you best.  Many will offer a free 1hr consultation.

[BLL]

An LLC will also give you more tax advantages. 

What tax advantages are available to an LLC that are not available to everyone else? Legitimate business deductions are always deductible.

[motivatedceo]

It will provide you "some protection" - but you'll want insurance too.

In Dallas it's real easy to put property in an LLC. You just need a warranty deed & $16 cash for a recording fee at the county records building.

Just draft a simple warranty deed (see http://www.ilrg.com/forms/wrntdeed.html) or have your lawyer do it, and sell the property from yourself "John Doe" to your single-member LLC "Diamond Investments LLC" for $0.01. Nice & easy. If you have a multi-member LLC (2+ members), and you don't want to share equity in full with both partners, you'll need a lawyer to property draft your LLC operating  agreement before you do that.

Don't forget insurance is your ultimate protector though! A single-member LLC can protect you some, but a lawyer will almost always try to sue YOU along with the LLC if you have one. They'll probably do that with a multi-member LLC too. So always, always, always get insurance for every single property and an umbrella once you get several properties.
 
Good luck!
 

  I currently own a few SFH rentals and 1 personal home.  and I helped with a substantial amount down to purchase one as a rental for my S/O who may well end up as my Legal wife soon.

That house is titled in her name,  the 2 others in mine.  To protect us both for a number of reasons *Should we consider transfer title of the homes to an LLC? What protection would that afford us?   What might the cost be $$?

 Would that give us protection of liability from the outside... Maybe even from each other in the event of marraige/divorce... I am not clear on the use of an LLC other than to separate the liability holdings from personal assets.

Thanks for clarifying -

[HoldAndBuy]

thanks for the info