Asset protection is such a crucial element of investing. One of the most important parts of asset protection for real estate investing is holding your properties in a limited liability company (LLC) or a similar entity. Sunshine asks the following question about when to put her property inside the LLC:

Q: Tom,
I am in the process of purchasing a second investment home and also at same time setting up LLC (home is a shortsale). When do I transfer investment property into LLC - can I do this with title company at closing or will the bank frown and not give loan - should I wait til all is said and done and own investment property?

A: You can transfer your property to an LLC immediately after you close on the purchase. Be sure to use a warranty or grant deed when you do it (not a quitclaim deed). The bank will never like it. You are probably violating your due on sale clause when you do it. In all my years of being a CPA, I have never seen a bank call a loan because it was transferred to an LLC. Doesn’t mean they won’t or can’t, just seems unlikely. If you are going to do this, then I would have your title company do it immediately after your closing with the bank so you get the maximum asset protection.

Warmest regards,

Tom

You can transfer your property to an LLC immediately after you close on the purchase.