In today's episode I talk to one of my insurance agents (Joshua Dupree) to answer many common (and not so common) questions that real estate investors ask.  Insurance is a necessity but there is so much confusion surrounding what coverage to get, how much coverage, what deductible, and replacement cost versus actual cash-value.  All that and so much more.

Don't miss this episode - it is full of great information that might have you review and questioning your current insurance policy.

For those interested, here is Joshua's contact information:

Joshua Dupree
Missouri Farm Bureau Insurance Services
(816) 833-4440
www.mofb.com

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Welcome to Passive Real Estate Investing. I'm your host, Marco Santarelli. On today's show, we're going to talk about the truth about property insurance. We get a lot of questions from investors about where to get insurance, how much insurance, how high their deductible should be, what's covered and then there's the always confusing question about replacement cost versus actual cash value, which seems to be debated in perpetuity online in real estate forums. I wanted to bring my insurance agent on, a guy named Joshua in Missouri where I'm buying properties right now. I asked him a bunch of questions about property insurance, what's the proper coverage, how to compare different policies, how much deductible is enough, etc, etc. It's really not as confusing as you might think, but it's important to understand what you're looking at and how to compare one policy to another policy.

Without further delay, we're going to get him on here in just a moment. But before I do, I wanted to talk about a listener question that came in recently. The question was, "Can I put my property in an LLC after I close with conventional financing?" The short answer is, yes, you can. After you close escrow on your property and you take title, you can do whatever you want with your title. In other words, if you want to take it out of your name and put it into your LLC, for example a holding LLC, a limited liability company, you're more than welcome to do that.

Now, keep in mind that lots of mortgage documents, most mortgage documents have what's called a due-on-sale clause. Technically speaking, if you do transfer title out of your name, when you have a mortgage on that property and you put it into another entity, you technically breached or triggered that due-on-sale clause. What that means is that if the lender wanted to, they could accelerate the loan and demand that the loan is due in full and payable immediately.

Now, I've never seen that happen. I've heard of it happening. But I think to be quite honest with you, it is extremely rare because at the end of the day, if the lender is getting a payment every month like clockwork from you, they're not going to care anything about whether you're holding title in your name or in an LLC. They may not like it but they're not likely going to accelerate the loan because it's just too costly and too much of a risk for them to try and do that knowing that they’re going to get monthly payments as opposed to try and collecting the whole amount of that mortgage balance from you.

If you close escrow on a property, you could put it into a trust, you could put it into an LLC. You're free to do what you choose to do with it. Just keep in mind that there is this due-on-sale clause in the document, but you can hold title in any entity or trust that you choose. Many investors do this. It's not really a prudent thing to hold title to your rental portfolio in your name. It's a bit of an exposure. It's like having a target on your back saying, "Look, I own all these assets." If you ever get into a lawsuit,