I moved out of my old house and turned it into a rental. The deed and loan are under my name but I want to put it under my newly created LLC. What is the process for doing that? My rental is being managed by a PM. Do I need to let them know?
Residential Real Estate Broker · Cartersville, GA · Member since 2015 · 575 posts · 581 votes
7y
@Kyle Johnson I agree with @Mike S. that the better option is to have it titled into a trust and then have the beneficial interest of the trust be owed by an LLC (Preferably a multi-member LLC). Where is disagree is that it gets you around the due on sale clause in your mortgage because it doesn't unless you personally continue to occupy the property (which you won't be if its a rental) Yes your PM will need to change the name on the management agreement since you will no longer be the owner. As to a bank calling anything due; true, it could happen but it isn't going to and worst case scenario you just deed it right back into your personal name but again it aint gonna happen.
Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes
7y
You will have to changed deed to reflect the new entity. I use a lawyer for that and we quit claim it.
The fine print on your loan may not allow you to do this. Be careful and ideally ask them permission.
For the property manager, probably they'd never find out, nor care. You are still authorized to hire, even though it is in an LLC. Technically, your agreement / contract should mention the LLC entity.
Investor · Broward County, FL · Member since 2018 · 1k+ posts · 938 votes
7y
Do not use a quit claim deed. Use a warranty (or special warranty deed) instead to avoid risking loosing your title insurance.
Also with your lender you may trigger the due on sale clause. To avoid that, create a land trust where you are the initial beneficiary. Deed the property to the land trust. Then later assign the beneficial interest to the LLC. Don't forget also to change the name insured of your insurances to the land trust with you and the llc as additional insured.
Residential Real Estate Broker · Cartersville, GA · Member since 2015 · 575 posts · 581 votes
7y
@Kyle Johnson I agree with @Mike S. that the better option is to have it titled into a trust and then have the beneficial interest of the trust be owed by an LLC (Preferably a multi-member LLC). Where is disagree is that it gets you around the due on sale clause in your mortgage because it doesn't unless you personally continue to occupy the property (which you won't be if its a rental) Yes your PM will need to change the name on the management agreement since you will no longer be the owner. As to a bank calling anything due; true, it could happen but it isn't going to and worst case scenario you just deed it right back into your personal name but again it aint gonna happen.
Investor · Broward County, FL · Member since 2018 · 1k+ posts · 938 votes
7y
Originally posted by :
Where is disagree is that it gets you around the due on sale clause in your mortgage because it doesn't unless you personally continue to occupy the property (which you won't be if its a rental)
Most mortgage will let you rent your property if you live at least one year in it before moving out.
When you deed your property into the land trust, you need to still be the beneficiary of the trust initially. As such the Garn St Germain Act will protect you against any due on sale clause.
When you later change the beneficiary to your LLC, it could technically trigger the due on sale clause, but because this assignment is a private document that is not recorded, the lender won't know about it. If it become a problem and they require proof of it, you can always reassign the beneficiary to you. This assignments of beneficiary are private unrecorded documents that would just need the trustee and your signature.
Do not use a quit claim deed. Use a warranty (or special warranty deed) instead to avoid risking loosing your title insurance.
Also with your lender you may trigger the due on sale clause. To avoid that, create a land trust where you are the initial beneficiary. Deed the property to the land trust. Then later assign the beneficial interest to the LLC. Don't forget also to change the name insured of your insurances to the land trust with you and the llc as additional insured.
Mike I like what your saying but I have a few more questions.
1. Why Warranty vs Quick deed?
2. Do you have a recommendation of where I can find steps to complete this Deed?
Investor · Broward County, FL · Member since 2018 · 1k+ posts · 938 votes
6y
@Jeff Betschart
WD vs QC. https://m.youtube.com/watch?v=srTDquLh4e8
For the land trust, if you are in a state that has specific land trust statutes, you should probably refer to a local lawyer that could guide you through the specificities of your state. But once you learn your first one, you can copy and repeat easily. In Florida there is a very good book for DIY land trust by Mark Warda.
There are also more generalist information that you can buy online. “Mr Land Trust” is one of the most active provider in that field.
There are also some very good free videos about land trust on the same YouTube channel than above.