Close under personal name or under LLC?

Question

Hi Everyone,

I already have 1 rental within an LLC, and am scheduled to close on a personal single family home with my wife in ~ 2 months. However, during the 1 year build process we have decided to move however we plan to keep the home as an investment.

I am receiving conflicting information in regards to if we close personally, and then swap the home into the LLC shortly after closing. Conflicting info being whether or not this would affect my wife and I in regards to purchasing another personal home.

Does converting the home into the LLC absolve us from any liability and/or from the Mortgage note or are we still on the hook?

Thanks,

Kevin Kelliher · Answer

We signed a Contract a year ago to build, financing was not involved.

We have enough money to put down. Financing is not secured until 30 days prior to closing to lock in our rate....which is why I have not formally reached out to lenders yet.

Aaron K. · Answer

You already have this home under contract and have not secured financing yet?

If so you may have a larger problem unless you have the savings to put up a down payment high enough for an investment property.  You need to talk to a lender about what you need before deciding where you want it held.

Kevin Kelliher · Answer

Thanks - we have not secured financing yet....right now we're trying to figure out if we should secure on our own (wife and I) or secure through the LLC.

Our worry is closing on this home and then losing the ability to purchase a home where we move (or the interest rate becoming jacked up due to that potentially being a "2nd home" in the lenders eyes.)

Aaron K. · Answer

The due on sale clause could kick in so you might roll the dice there, even if you purchase in an LLC many lenders will require you to personally guarantee the loan.  Also if you got owner occupant specific financing you may need to refinance it anyway to stay within the lender's rules.