Transfer title from personal to LLC

Orange County, California
General Real Estate Investing
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Transfer title from personal to LLC

Daniel Serrano
Member since 2022 · 6 posts · 2 votes

Hello all,
I recently started investing in real estate which is probably the greatest decision I've made. I reside in Orange County, California and rented my primary home which I've owned for a little over two years now. I am in the process of creating an LLC and would like to transfer the deed from my personal name to my LLC. I have spoken with my bank and advised them of the situation. They informed me there should be no problem performing the transfer. What is the best possible way to perform this transaction? Do I need to go through a title company or lawyer?
Any advice helps! Thank you!

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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
3y

@Daniel Serrano

Not an attorney (gotta start with that).

How is your LLC completely separate from you? This is not an arms length transaction.

You personally are still on the mortgage

Try sitting in front of a judge when the other attorney says yes your honor, daniel gave the property away for free since his LLC didn't pay for it, his name is still on the mortgage but you want us to believe the entity is separate from him.

Then they ask you:

Daniel - have you ever quit claim deeded a property to a LLC that you didn't control?

Do you pay or have a mortgage on a property you do not own?

Will a judge believe your LLC is separate from you as an owner?….

Now the reason people never mention this is because landlords never get sued and if they do they have insurance that covers them. But your still throwing thousands away in year in having taxes and LLC fees.

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  • Davide Formica
    Real Estate Agent · Columbus, OH · Member since 2018 · 41 posts · 31 votes
    3y

    @Daniel Serrano I suggest asking a real estate attorney to assist you in filling a quitclaim deed transfer.

    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Daniel Serrano

    You realize this doesn’t give you asset protection?

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  • Daniel Serrano
    OP
    Member since 2022 · 6 posts · 2 votes
    3y

    @Chris Seveney

    How so? May you please explain. 

    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Daniel Serrano

    Not an attorney (gotta start with that).

    How is your LLC completely separate from you? This is not an arms length transaction.

    You personally are still on the mortgage

    Try sitting in front of a judge when the other attorney says yes your honor, daniel gave the property away for free since his LLC didn't pay for it, his name is still on the mortgage but you want us to believe the entity is separate from him.

    Then they ask you:

    Daniel - have you ever quit claim deeded a property to a LLC that you didn't control?

    Do you pay or have a mortgage on a property you do not own?

    Will a judge believe your LLC is separate from you as an owner?….

    Now the reason people never mention this is because landlords never get sued and if they do they have insurance that covers them. But your still throwing thousands away in year in having taxes and LLC fees.

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  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    3y

    Is this your primary residence? Are you planning on selling it anytime soon? You will relinquish your homestead tax exemption once you do this.

    0Reply
  • Brad Jacobson
    Realtor · Ogden, UT · Member since 2019 · 338 posts · 415 votes
    3y

    The best way to create protection is to transfer the property into an LLC and then a trust. The trust will create privacy and the LLC, if done correctly, should limit your liability.

    Find a rockstar RE attorney in your state and have him or her guide you through their recommendations. Utah's best recommends what I've outlined with the LLC covered by a trust.

    Good luck!

    0Reply
  • Katie Balatbat
    CPA and Attorney · San Diego, attorney · Member since 2022 · 302 posts · 219 votes
    3y

    @Daniel Serrano

    Are you still living in the property as your primary residence? You plan to continue to do so while title is in the LLC?

    *This post does not create an attorney-client or CPA-client relationship.  Readers are advised to seek professional advice.

    0Reply
  • Jason Marino
    Attorney · Member since 2022 · 160 posts · 186 votes
    3y

    Hi Daniel,

    Some of the posts above brought up some considerations regarding homestead tax exemptions that are good to keep in mind if you decide to make this transfer. Despite what was stated above, an LLC can protect you and isolate your liability when properly created and maintained. Piercing a corporate veil, in many States, involves a specific multiple point test that needs to be passed to show that your entity is really just an extension of the owner. It is not an automatic process that would apply to all single member LLCs. In relation to your question, you would first create the LLC. You could do this yourself if you had the time and ability to do all of the research to do it accurately. The LLC should usually be formed in the State where it owns property, you would then get an EIN for the entity to be able to get a bank account for the LLC, and you should have an Operating Agreement that corresponds to your situation. Once the LLC is completed, you would make a transfer from your name to the LLC via a Deed. Some other things to consider are the fairly high annual franchise tax fees that apply to California LLCs, and you should additionally confirm that the transfer from your name to the LLC will not have a situation in which a transfer tax will apply.

    3Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y
    Quote from @Daniel Serrano:

    Hello all,
    I recently started investing in real estate which is probably the greatest decision I've made. I reside in Orange County, California and rented my primary home which I've owned for a little over two years now. I am in the process of creating an LLC and would like to transfer the deed from my personal name to my LLC. I have spoken with my bank and advised them of the situation. They informed me there should be no problem performing the transfer. What is the best possible way to perform this transaction? Do I need to go through a title company or lawyer?
    Any advice helps! Thank you!


     I suggest speaking with a good attorney as there is a lot of bad information on public forums and most spend way to much time and money doing stuff that does not need to be done. 

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  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    3y

    Not an attorney either but quitclaiming it over isn't the end all be all for proving no liability and piercing the veil. In a court case, that won't win it alone.

    You'll need to establish multiple things to prove it, but mainly.

    1) Fraud

    2) Unity of interest

    If you keep insurance, management agreements, bank accounts, etc., all separate it's going to be hard to pierce the veil and definitely won't let just quitclaiming it over defeat it. But get an attorney to walk you through. 

    1Reply
  • Sarah KensingerPro Member
    Real Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
    3y

    This would be good for you to watch.... Due on sale clause. The firm would be a great one to connect with to advise and help with real estate legal matters. We love working with them! 

    Also, I just listened to an interview with Pace Morby on SubTo, which is another way to possibly cause the due on clause sale. His title company has only dealt with 10 due on clause sales and they have never lost a house because of a due on clause sale. In his words it's beyond rare to happen and they run thousands of properties through their title company with SubTo.

    [email protected]330-557-3021
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  • James Hamling
    Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    3y
    Quote from @Chris Seveney:
    Quote from @Daniel Serrano:

    Hello all,
    I recently started investing in real estate which is probably the greatest decision I've made. I reside in Orange County, California and rented my primary home which I've owned for a little over two years now. I am in the process of creating an LLC and would like to transfer the deed from my personal name to my LLC. I have spoken with my bank and advised them of the situation. They informed me there should be no problem performing the transfer. What is the best possible way to perform this transaction? Do I need to go through a title company or lawyer?
    Any advice helps! Thank you!


     I suggest speaking with a good attorney as there is a lot of bad information on public forums and most spend way to much time and money doing stuff that does not need to be done. 


    I second this as about 90% of what I have ever read on asset protection in online forums is incorrect from either omitting complete info, or just flat wrong. 

    But here is another point to think about, this is some much MUCH easier way to do it than complicated entity formations. 

    The simplest I have ever seen is where ownership is held in one entity, even a personal name. And than leases it to the public facing company, call it "Rental CO. A". 

    The leases are done as a NNN lease with the operating rental "tenant" taking on 100% of liability. This way, no need for multitudes of entities, only making sure that rental entity is operated 100% stand-alone. Because if ever sued, it's only got operational funds, no assets at all, zero.

    I was taught this approach as an "Asset island" approach. Not a lawyer, not legal advice, just sharing observations and experiences. 

    1Reply
  • Luka Milicevic
    Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes
    3y

    I've done this many times. All I've ever had to do was tell my title co to prepare a quit claim deed. I come in sign, done. Less than 2 mins. 

    Usually costs me just the recording fees for the transaction which are very low.

    Good job on getting your lender's blessing. That is a MUST!

    In addition, if you are doing some sort of a short term rental or other rental that requires a permit. Make sure you can continue to do so in an LLC.

    You can lose a permit if ownership transfers....ask me how I know!

    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @James Hamling

    I am still trying to figure out what you can get sued for that wouldn’t be covered by an umbrella insurance policy on a single family rental?

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  • Raman Saka
    Member since 2020 · 23 posts · 12 votes
    3y

    Just as others have suggested, reading your current mortgage and talking to your lender is the first step. If that's done, then the rest of the process is not hard. I did it for multiple properties. In WA state you need to fill in a form and pay excise tax. The form is tricky, has bunch of codes to show that its not a sale but just an identity change. The officials in Snohomish county WA were very helpful, they made sure I wrote down the description of the property exactly as it shows on deed and few other finer details. Good thing is there are no delays, the new warranty deed gets recorded the same day. 

    0Reply
  • James Hamling
    Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    3y
    Quote from @Chris Seveney:

    @James Hamling

    I am still trying to figure out what you can get sued for that wouldn’t be covered by an umbrella insurance policy on a single family rental?

    Sure, but in this day and age of multi-million dollar liable awards for "hot" chicken nuggets, it's a heck of a question of just how many millions an umbrella policy need be, just how much added expense that is, and if liable exceeds that coverage were back to assets being at risk are we not. 

    While a very easy action of simply holding properties in one entity, LEASING them to the public facing rental organization who then is leasing them, has all the liability exposure and NO assets to ever attach, ever, at all.... 

    I just seems to make sense being so simple to do. One could get a far cheaper umbrella policy because one doesn't need to worry about asset protection. Not to mention avoiding the various frivolous suite attempts as any good scammer checks just how "juicy" a mark can be first and when finds the co own nothing, 0 assets, why waste the time to scam a company with 0 assets. 

    Again, it's simple, so simple to do, so why not? I can't think of a single good argument against the asset island method.

    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @James Hamling

    Waste of money and show us a case on a single family rental with a property manager where someone was personally liable where insurance did not cover them ?

    Unless they were fraudelant or broke the law, you will have a hard time.

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  • Daniel Serrano
    OP
    Member since 2022 · 6 posts · 2 votes
    3y

    Thank you all for the feedback. Based on all of your replies I did a little more digging and found a video by BiggerPockets that was a little useful, I've attached the link below. That being said I am still trying to decipher if forming LLCs is still a good idea while also having another set of asset protection. 

    0Reply
  • Peter MckernanBusiness Member
    Residential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
    3y
    Quote from @Daniel Serrano:

    Thank you all for the feedback. Based on all of your replies I did a little more digging and found a video by BiggerPockets that was a little useful, I've attached the link below. That being said I am still trying to decipher if forming LLCs is still a good idea while also having another set of asset protection. 


     I had that Brian on my show link below. I am in Orange County as well, I can get you in touch with a couple of attorney's and CPAs that can guide you to your answer! Not everyone here is an attorney or CPA, they don't know your situation and they also are not in California. Just make sure you are working with someone that has all those perimeters before you make a full decision on which way to go. 

    https://podcasts.apple.com/us/...

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  • James Hamling
    Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    3y
    Quote from @Chris Seveney:

    @James Hamling

    Waste of money and show us a case on a single family rental with a property manager where someone was personally liable where insurance did not cover them ?

    Unless they were fraudelant or broke the law, you will have a hard time.

    I had an instance a few years back from a landlord who owned several MFH properties, something like 7 buildings. Guy came through as a seller lead, and I worked it from that angle. 

    I had heard of the guy before, he had a reputation as a bit of a slum-lord. I don't recall exact details but he had been fighting a claim that happened at one of his properties, I don't recall exactly how it went but something that started from 1 evicted tenant, that he lost, in process of fighting other evicted tenants had been notified, and everyone jumped on the band wagon, he had horrible documentations and did a horrible job fighting it, so lost in grand manner. Notice had gone to lender on property, because the tenant who initiated was out for blood. Insurance wouldn't cover, and bank called his note due. 
    Which then bleed into another property, and over a few months everything came unwound and he was at risk of loosing everything because of the way dominos were falling. 

    The whole thing started from a PM issue/claim. I have no doubt he had done things at least a bit wrong, but also no doubt he hadn't done it all exactly as tenant claimed. Seemed truth was somewhere in middle but never-the-less it opened a pandoras box. 

    I offered a life-line but he didn't like it, he wanted me to just offer private $. I didn't like him and didn't want to work with him, just an oil & vinegar thing. I was ready to buy out half the portfolio which would drive enough capital to secure the other half, address the issues, get through the storm. 
    He had tunnel vision, he was dead set that he wouldn't give up a single property. 
    In the end, first property was taken by bank and sold weeks later to a pocket buyer which created situation where all his notes were called due and in the end he was left with just 1 property left. 

    I get it, your all about umbrella policy, I never said that's a bad idea, but it's not a perfect in-all-end-all either. It cost's $ for that coverage does it not? And the more coverage, the more the cost, correct? 
    What I am saying is with a SIMPLE entity situation it can EASILY reduce the amount of umbrella policy needed, thus saving on expenses. 

    Not sure why a simple 2 entity structure is viewed as a "waste of money".    I recall thinking with this one guy, if he had operated such structure his entire exposure of the issue would have been limited to his PM operation, nothing phasing back to properties as it had. 

    And while I don't condone any kind of unethical/illegal landlording actions, fact is some times a person does the wrong thing unintentionally and learns via enforcement actions. How many novice landlords do we see on BP presenting situations where they are clearly violating fair housing reg.'s or other reg.'s and they are oblivious to such? Yeah, that would be illegal actions right? Should they loose there properties for their ignorance? 
    0Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    3y

    Two entity structure is a necessity. Title holding LLC and management LLC. Very hard for the court to prove title holding LLC is at fault for basic issues at the house level that management LLC and tenant disagreed on. The management LLC can be held liable. But if there's no assets, good luck getting a lawyer involved.

    0Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    3y
    Quote from @Sarah Kensinger:

    This would be good for you to watch.... Due on sale clause. The firm would be a great one to connect with to advise and help with real estate legal matters. We love working with them! 

    Also, I just listened to an interview with Pace Morby on SubTo, which is another way to possibly cause the due on clause sale. His title company has only dealt with 10 due on clause sales and they have never lost a house because of a due on clause sale. In his words it's beyond rare to happen and they run thousands of properties through their title company with SubTo.


    Had a family friend get called on theirs with a STR in the smokies. Payments have been on time, loan was at 3% ish. The attempt was to get it refi'd.

    Their legal team said go-ahead and foreclose on it, they'll fight it and it's a FM loan. Provided they followed TNs law with FMs servicing, it's their right to transfer to a LLC. Bank rescinded it, was a large middle market bank. Not bulge bracket but close. I'm thinking any bank ready to call needs to be ready to put their balance sheet up. They won't do that unless you're not paying your mortgage.

    0Reply
  • John MorganPro Member
    Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
    3y

    @Daniel Serrano

    I regret moving mine from my personal name to my LLC, but I did it with an attorney at the local title company to deed them all over to my LLC. It cost me around a grand for 6 or 7 properties. But I've talked to attorneys who tell me they can easily pierce the veils on them if they wanted to so they don't advise it. Instead, they tell me to just get extra liability on the rentals of around one million.

    0Reply
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