Here’s how investors can avoid running into title insurance issues.
We want to discuss something property owners should know about, even though most of them don’t. Did you know that if you move property you own into an LLC or trust, you could be putting yourself at risk?
When most of us buy investment properties, we buy them through our personal names because that’s where our income is coming from. Afterward, we contact an attorney and move the property from our name into an LLC. Easy, right?
Ask your title company about any issues early in the process.
Unfortunately, you risk losing your title insurance doing this, and here’s why: If you move a property to an LLC under the same entity as the initial purchase, your title company may not recognize the owners as the same. We asked around, and while some title officers said it would be fine, others were skeptical. Based on what we could find, it seems like there is no industry consensus on this issue.
So what can you do about this? If you own any properties and have moved them into an LLC, ask your title company if the policy is still valid. If you’re buying a property and you know in advance you’re going to move it into an LLC, ask your title company about it early in the process. Finally, you should consult an attorney who specializes in LLCs and trusts.
Hopefully, this cleared up some confusion surrounding LLCs, trusts, and title insurance. If you have any questions about today’s topic or real estate in general, please call or email us. We are always willing to help.
