How we title our real estate properties

I receive tons of reader questions via email, Facebook and twitter and it’s about time I start posting my responses publicly.

 

Today’s question comes from reader NB.

 

Hello Mr Brown!!  I enjoy the blog – I check it daily and can’t wait to see your success blow through the roof!!! Question for you – do you currently run your real estate business through an LLC?  One LLC or an LLC for each of your properties (do you buy the properties in the LLC name)? I am always curious to know how other real estate investors deal with this for liability protection. I personally purchase higher end properties for long term cash flow and appreciation – I have lots of liability protections but don’t currently run an LLC but man it just seems like the “thing” to do in real estate. Especially with the kind of properties you purchase I was curious what liability protections you have taken?

 

My response

 

NB,

Thanks for contacting me.  I will try my best to answer your question.

Currently I run all my properties in my name.  The reason I handle things in my name is because of financing.

I could not find a bank willing to lend to me if the property was titled in my corporations name.  Unfortunately, this exposes me to personally to being sued.  But, it’s an easy way to defend against that.


I have a 2 million dollar umbrella policy, ensure I maintain the property properly (keep up on the maintenance) and have dwelling insurance.

You only get sued if you don’t take care of the property.

Once, I can no longer get financing under my name, I will probably pay off the properties and transfer assets into my LLC to allow me finance more properties.


Unfortunately, there is no one way to handle the titling of property.   It is up to your unique situation.

But… if banks would allow me to get financing under an LLC.  I would… title the property in a trust and make my LLC the beneficiary.

This will allow privacy and LLC protection a utopia of protection :-)

 

update:  After responding to NB’s email, I realized we needed more protection.  I’ve since upgraded my umbrella policy from 2 million to 5 million.

 

Do you have a question in which needs an answer?  Send me an email to yourfinancessimplified@gmail.com and I will get back to you as soon as possible.

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Comments

  1. You say that when you can no longer get financing in your name then you will transfer your properties into an LLC. I have a question. So you can only have 4 mortgages these days…at least that's what I've been told and researched, but my question is once you max out your mortgages can you then transfer everything over into an LLC and qualify for more mortgages…that's if your debt to income ratios and all your numbers work out to get the mortgages? Are the "rules" different for an LLC? Can a corporation (LLC) have more than 4 mortgages?

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