Has anyone had experience buying an investment property in their personal name, then shortly after closing title, quit claiming into the newly created LLC?
I am looking to buy a 4 family and will have a mortgage on this. My lender won't lend to a newly created LLC. my plan is to take tile in my name and then move it to an LLC via quit claim.
I am aware this can trigger the due on sales clause from the lender but I was wondering there are other things to consider as well, or if there is a better way to do this?
as always thanks in advance!
I purchased a 3 family originally under my name and then put it under LLC. I originally requested an "ok" from the lender during the closing process which they gave to me BUT they sold the mortgage to another lender afterwards. So I called the new lender and customer rep told me it would be ok. You should contact the lender.
Some lenders will lend to LLCs, not all but some.
What is the purpose of the LLC? taxes, anonymity, or asset protection. Those can be 3 different issues and sometimes conflicting issues.
Here to transfer from personal name to LLC will cost 2-5% transfer taxes and some smaller recording fees. Then if you rifi, you'll have to unravel and transfer title again costing another 2-5%. Check with your title company ot your state to see if they'll charge transfer taxes.
Many insurance companies charge higher premiums for properties in LLC, writing commercial policies instead of residential, so there's another costs.
And using a Quit Claim Deed is worst way to transfer title. If you have a warranty deed, and why wouldn't you, why sever that warranty and give a deed with no warranty. Future title searchers will wonder why the QCD, what's wrong with this title?
And also lastly transferring title to a new entity will invalidate most title insurance. so you paid for title insurance maybe thousands of dollars, then you throw it away. most title insurance is only valid as long as you own the property, by "selling" to your LLC, you don't own the property the LLC does, its a break in ownership.
Title problems are rare. We've had issues going back 2 owners before us, where a mortgage wasn't satisfied. 2 owners since got title insurance, in error. If we had invalidated the title insurance we could not have filed a insurance claim. Another time there was a unrecorded municipal lien for improvements. Not recorded at the courthouse. Title insurance paid that claim also.
Just got a property worth maybe $40-50K. There's an outstanding mortgage from 2 owners ago for $140,000.
Purpose of the LLC is because it will be owned by more then 1 person. It will be a Limited Partnership operating as a LLC between two people. Title will be taken in both our names intially but Mortgage will be in his name for reasons I won't go into here.
Once we close title we will form our Limited Partnership LLC and planned to quit claim title into it and add the LLC to the Insurance Policy.
I'd be cautious. I'd look into finding a lender to do LLC lending, look at brick and mortar lenders like regional and local banks and credit unions.
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