Due on sale clause-did it happen to anybody?

[Mary Jay]

Hi guys!

I am really scared of this due on sale clause that happens when you transfer your rental into an LLC.

So Ive been postponing and postponing doing so with one of my rentals that is more expensive because I am worried that if I transfer that rental into an LLC and the bank does the due on sale clause then I wont have enough of money to pay the balance off or may not get financing quick enough through a different bank.

Ive tried to search this forum to see if somebody had that happen to them, but no luck. May be its all just in theory but in practice happens super rarely?

So Ive decided to ask. Has due on sale clause ever happened to you on anybody you know when you transferred your rental into an LLC or because of another reason?

1) How many rentals have you transferred from your name into an LLC ? Important part: did you buy it as a rental or you bought it as a primary residence for yourself?

2) How long did you own it?

3) Did you ever had due on sale clause happen to you?

I will start myself: I bought one property on my name and lived there for 6 months then transferred into LLC. No due on sale clause happened

[Russell Brazil]

Every now and then you do see someone on the forums that it has happened to. A very small number for sure, but I expect it to become more common as we are now in a rising interest rate environment.

But let me pose another scenario to you. Presumably you put the property in an LLC for liability protection. Well if the mortgage is still in your own name, and the LLC owns the property....to me that would appear to be a very easily piercable entity.