Title to LLC - Risks & Rewards

4 Replies

I’m looking to buy my first multi-family either duplex or fourplex. I found a lender who upfront wants to provide me a conventional loan and has no issue if I transfer the title to my LLC after closing. My goal is monthly cash flow so the conventional loan makes the most sense. BUT, there are potential risks if I deed the property to my LLC. -First off I’m not worried about the bank triggering the due on sale or acceleration clause because my lender has already given me the thumbs up. -Q1: Sounds like I loose title insurance if I transfer title to my LLC. Is there something I can do to protect myself further? -Q2: My long term goal is to refi down the road to pull equity out. I can deed the property back to myself but may have big tax implications. Are there ways to defend against this? -Q3: What else do I need to consider?

First, I'd get the bank to put in writing, on letterhead, that they wouldn't pursue the Due on Sale clause. I've never seen it enforced, but can't hurt to CYA.

Your other questions are really specific to you ... I'd recommend talking to your attorney AND CPA.

Thanks Jeremy! I've called the title company and they confirmed that the Title Insurance will transfer from me personally to my LLC. Turns out if I had a partnership this would be more complex, but since I'm transferring title to my single member LLC they'll still recognize the insurance if needed. It sounds like it depends from title company to title company whether they do this.

@Chris Schroeder , I would second what @Jeremy Hart said and get it in writing (I bet they won't do it) if you are really concerned about the DoS clause because realistically these loans get sold all the time. I guarantee you that the next servicer/lender is not going to honor a verbal commitment from a loan originator at a previous institution. They are going to go off of what the contract says.

Starting out with real estate investing there is no advantage to having a LLC. Aside of course from physiological protection. You would be better off not using a LLC and keep the properties in your own name. Adequate insurance will be more than sufficient to protect you provided you do not make the mistake or accumulating excess dead equity. Inside or out side a LLC dead equity is always a high liability risk.

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