Legal Question in Real Estate Law in Texas
I am borrowing money from a bank to buy income producing multi-family property, however, the due on sale clause will not allow me to quit claim the property into an LLC, allowing me to limit personal liability for anything that may happen at the property. How can I limit my personal liability when purchasing a multi-family property?
2 Answers from Attorneys
You can ask the bank to waive the due on sale clause. The bank needs to do this in writing. Also, you should get adequate insurance policies to protect yourself. Finally, don't use a quitclaim. This is not a DIY project, get a lawyer. You can probably have this whole thing done for you for a few hundred dollars.
A better solution. Form your LLC. Arrange for the bank to loan the money to the LLC. You sign a personal guarantee on ther loan, so the bank is happy. Buy the property in the LLC. As stated above, get adequate insurance -- likely the bank will require it, anyway. Yes, you need to hire a lawyer for this.
PS: Despite following the above, if you're personally managing the property, or maybe even if not, someone who gets hurt there might well sue you personally anyway -- even if you're not liable, you have to defend the suit. Again, get adequate insurance.
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