Transferring title to an LLC

[Mike St. Jean]

I had my FHA loan written under my name and my girlfriend's name. I want to transfer the title to my MA LLC before renters are in. MA LLC is owned by our Wyoming holding company.

I've been told to quit claim the deed, but after some research I want to avoid that as it might indicate issues with the title. Perhaps warranty deed?

My mortgage company will be selling the loan, but I believe I need to ask them if there's a due-on-sale clause first. In the event there is, is anyone aware of a work around where I can get the title transferred to my LLC? TIA!

[Greg Scott]

Your loan will almost certainly have a due-on-sale clause. If you ask the bank about it, you will draw attention to your situation. I also understand FHA has language in their loan docs that require the borrow to be a human, not an LLC.

I've heard lawyers argue that if the loan is in your name and the deed is in an LLC, if there was a big lawsuit, the opposing counsel could argue that you have pierced the corporate veil because you have not treated the LLC like a separate entity. In that case, the judge might conclude your LLC is invalid, providing you no protection, which is the worst case scenario as a landlord.

On another note, if you put the property in the LLC and later want to do a cash-out refi with an agency loan, you would have to quit-claim it back into your name and then wait 12 months to do the refi.

Alternately, you could beef up your insurance.  When I had lots of SF rentals, I used to have $500K liability coverage for each property plus a $2M umbrella.  Seemed to me that covered 99.9999% of possible issues.