Transfer property to LLC

9 Replies

Hi everyone,

I am getting ready to close on my first investment property and looking for some advice on how to transfer the property into an LLC. Since this is my first property, I will be getting a personal loan at 10% down and plan to transfer the ownership into an LLC after closing. Does anyone have any experience or tips for doing this?

Contact the title company you are using to close on the property and ask about "quit-claiming" the property into your LLC name. Also, make sure your mortgage note with your lender does not prohibit this. If you have any more questions, don't hesitate to message me!

@Martin Fields

Careful about voiding your Title insurance

Careful about updating your insurance since they may have to update their mortgage clause in which the services will know Title changed

Get a lawyer to legally “informally” assume the mortgage. You have mortgage in your personal name but will have Title held by legal entity — who makes the mortgage payments. Protect your corporate veil and don’t co-mingle

Since you are potentially co-mingling, consult a professional or two.

Good luck

You can prepare a quitclaim deed yourself, go down to the county office (or equivalent for DC) and file it yourself. Note that your bank likely will be able to "Call" the note for violating your loan agreement terms. It is highly unlikely that they will do this, however. I typically wait a year or so before doing the quitclaims, this may come up on the Bank's title insurance at a later date. You probably got what is called a "conforming loan" therefore the loan will be sold into the secondary market and will be subject to random audits, so there is some risk in doing this, but from my experience as a Bank Regulator, I have never seen or heard of a loan being called due to this. Usually as long as you make your payments you should be ok; but still, understand the risks. Alternatively, and in the meantime, you can operate as a joint venture, draft a JV agreement that states the LLC will operate the property in a joint venture with you and your partners. State that the LLC will have the rights to all future capital gains or losses associated with the property, and all capital entries will be tracked via the LLC. I am no real estate lawyer nor am I a CPA, but I am a former FDIC bank examiner and my Wife/investment partner is a real estate CPA. There are some legal risks no matter which way you turn, its the nature of these smaller deals where one person is carrying the paper for others. You want the good rates and financing, but also want to invest other's money, it does not conform if you tell the banker's your plan... The ultimate answer is to consult a good real estate lawyer once you have your documents drafted. You can agree to run all taxable income through the LLC, and your partners would technically have a legal right and claim to the property proceeds depending on how you structure the agreement/operating agreement. Would I call it a rock-solid way of guaranteeing everyone's claim on their investment?? Heck no, it is way better if everyone is on the deed or a member of the LLC which owns the property; but it is still one avenue you can take to get a decent legal structure in place for these smaller deals. It could get very messy fast if there was ever a major disagreement in the partnership, so understand that as well.

Youll need to get a commerical loan (not happening with 10% equity) and update your insurance policy to a commercial one that insures the llc.

@Martin Fields “10% down” sounds like an “owner occupied” loan, not an investment property loan. 
Transferring title to a 3 member llc will void your title insurance and subject the loan being called due. You will have to change the insure owner on your insurance.