Sell houses own by LLC to spouse

8 Replies

Hi folks,

I and my business partner own a couple of properties under a 2-member LLC. Would it be possible (legal) to sell the houses to my wife or my business partner's wife and get conventional loans while doing that?

Any thoughts?

1. Contact an attorney familiar with LLC and Tax law in your jurisdiction.

2. I honestly doubt this would work, even if it proves to be legal. Lenders aren't stupid. They'll see your wife's name on the deed and immediately ask, "ok, so what's different between you, her, and your LLC?" Then no matter how you answer, in this day and age of Covid "Abundance of Caution" they'll just deny the loan. They're not hurting for borrowers right now.

3. Everything I've heard about LLC's says to get the loans in your name, then if you want to, transfer them to the LLC. But I've also heard opinions that you most likely won't really need an LLC. I don't remember the details, but we have a BPer who handles "Land Trusts" and recommends that strategy over LLC.

4. Did I say to contact an attorney? Bears repeating.

@Jielu Zhao I do not see why it would be illegal. Would your wife or business partners wife be able to qualify solely for the loan? 

If you don't mind me asking what are you trying to accomplish doing this, other than moving business debt to personal debt?

Hi Alvin. Thank you for the reply. I appreciate it!

Originally posted by @Alvin Sylvain :

1. Contact an attorney familiar with LLC and Tax law in your jurisdiction.

2. I honestly doubt this would work, even if it proves to be legal. Lenders aren't stupid. They'll see your wife's name on the deed and immediately ask, "ok, so what's different between you, her, and your LLC?" Then no matter how you answer, in this day and age of Covid "Abundance of Caution" they'll just deny the loan. They're not hurting for borrowers right now.

3. Everything I've heard about LLC's says to get the loans in your name, then if you want to, transfer them to the LLC. But I've also heard opinions that you most likely won't really need an LLC. I don't remember the details, but we have a BPer who handles "Land Trusts" and recommends that strategy over LLC.

4. Did I say to contact an attorney? Bears repeating.

 

Hi Chris. Thank you for your message.
The houses are paid off. We would like to get some liquidity out but have not found a lender who is willing to do cash out refi for a multi member llc, and we don't want to give up on the properties yet.

Originally posted by @Chris Davidson :

@Jielu Zhao I do not see why it would be illegal. Would your wife or business partners wife be able to qualify solely for the loan? 

If you don't mind me asking what are you trying to accomplish doing this, other than moving business debt to personal debt?

 

I would think it would likely trigger capital gains but talk to a CPA, I am certainly not tax expert. If you own it free and clear and are not able to get a LOC against the property then there must be an underlining issue besides the LLC structure. I don't see were a two member LLC has any bearing, think about all the partnerships out there that buy assets. Why are banks saying they will not lend to a two member LLC?