How to Title my first investment property?

Question

I am under contract for my first investment property. The property is in Florida. I have created and LLC but as it is brand new I can not establish a loan under the LLC and have to take out a personal loan. What is the best way to get the title under the LLC. Should I ask the lender if they will accept the LLC in the title with my personal loan? Is it better to title it under me personally then transfer to the LLC after? If the later, what is the best way to transfer? I’m currently searching for an attorney to assist as well but wanted to get some advice from you all based on your experiences.

Jonathan Taylor Smith · Answer

@Wendy Lacey - My $0.02 is that you'll be required to take title in your personal name matching the name on the loan for the vast majority (if not all) Banks and Traditional Mortgage Lenders. Post closing you can then seek to transfer title to your LLC, but you should subtly take the temperature of your lender on doing so (some don't much care what you do after closing as long as the payments are being made). If so, try to avoid escrowing for taxes and insurance, as it makes the change more obvious to the lender.

But beyond that, don't get caught up on this. It is not the end of the world (as some would have you believe) to own rental property in your personal name (especially in a state like Florida with great homestead protection). Just get good insurance on the property and  an umbrella policy from a reliable insurer that exceeds your net worth and sleep well at night. I didn't start using LLC's until I moved on from personal to commercial loans, and still own some of my properties in my personal name to this day.

Andrew Hodgson · Answer

@Wendy Lacey

I second @Marc Winter, land trust it. As others said, confirm that title company and insurances will be good with this strategy.

Wayne Brooks · Answer

You can’t get a conventional/Fannie with an entity as the title holder, period.  You Are allowed to close a Fannie loan in your personal name, then transfer title to a single member llc afterwards, as of a couple of years ago....no permission needed.  Make sure your title policy allows this, retaining coverage.

Marc Winter · Answer

@Wendy Lacey, I have never heard of a residential lender closing a loan where the mortgage/note are differently titled than the actual deed.  Of course, you should always ask--costs nothing to question.

FL is a great state for Land Trusts, so you should look into that as well.  Further, if you speak with your CPA or real estate attorney, they can direct you on how to establish the proper type of LLC which would not adversely affect you re: due on sale/transfer clause.

For the 1st property, I'd go with a Land Trust (not with your own name attached) and add a good umbrella insurance policy.  Please speak to your Attny and CPA to confirm.  Later on, with more properties, set up your LLC's accordingly.

Good luck!

Forrest Jackson · Answer

I would talk to the lender about obtaining the loan and title in the name of your LLC, but signing a personal guarantee on the loan.  I have done this without issue more than once with one of our local banks/credit unions.

How to Title my first investment property?

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