Transfer from LLC to Personal?

Question

Is it possible to transfer a property from a LLC to an individual? I'm looking to BRRRR a property and the HML I'm looking at using requires the property to be in a LLC. Could I transfer the property back to myself to obtain conventional financing when I go to refinance it?

Jim D. · Answer

Note also that when you go to refinance with a conventional loan in your personal name, the title needs to be held under your name for at least 6 months for them to do a fresh appraisal. So after you're done rehabbing, if you transfer title back into your name, you'll have to wait an additional 6 months (unless you want to be limited by the purchase price as your value). I recently got stuck on this and have to wait another 6 months to do a conventional cash out refinance, and am instead using a portfolio lender who is willing to do it.

Alan Rohrer · Answer

@Derek VanWinkle

There shouldn't be any income or capital gains tax consequences on transferring from a single member LLC to yourself, or the other way around.

@Nghi Le is right to consider transfer taxes (I am just talking about income tax in my post).

Just make sure there isn't a "Due on Sale" clause in the contract before you do the transfer.

There may be some solid tax strategies and significant savings around entity structures available if you plan to make this something you repeat. I say "if you plan to repeat" because the cost and complication is probably not worth it on the small scale.

Also, be sure to check with your personal CPA in case there is something specific about your situation that I'm missing.

Nghi Le · Answer

You might have to check with your local title/escrow/attorney for that information.  In my state, which usually charges a 1.78% transfer/excise tax on each sale, this kind of transfer is exempt from it because it's essentially still 100% the same owner.

However, I know that other states have a recording tax that applies to every single transaction.  Not sure if yours has that.

In terms of actual income tax consequences, there shouldn't be any.  Single-member LLCs are pass-through entities and go directly on your individual tax return anyway.  But confirm with a CPA :-)

Derek VanWinkle · Answer

Are there any tax consequences for doing so? It would be a single member LLC.

Amy Kendall · Answer

Yes, you can do a warranty deed or a quick claim deed.  Just talk with a title company and it is a pretty easy process and fairly inexpensive.