Anyone Familiar with LLC-Based Home Purchase Structures Like This?

Question

Has anyone here bought or sold a property using a structure where the buyer doesn’t get the deed, but instead buys membership units in an LLC that owns the home?

I’m looking at a deal for my mom where she’d be making a down payment and monthly payments in exchange for units in the LLC. The contract says she’ll gradually earn equity (2.681 units/month), and once she reaches 1000 units she owns the LLC and therefore controls the property.

A few things that concern me:

• She doesn’t have direct title or deed to the home
• If she misses a payment and doesn’t fix it in 30 days, she loses all membership units she’s earned...no refund
• She can’t sell her share or ask to sell the house until she reaches 20% ownership (200 units), and even then it’s subject to manager approval
• She can't rent the property without permission, even though she'd be paying monthly like an owner
• The manager (seller) can never be removed from control until/unless she owns the entire LLC

She doesn’t have direct title or deed to the home

If she misses a payment and doesn’t fix it in 30 days, she loses all membership units she’s earned...no refund

She can’t sell her share or ask to sell the house until she reaches 20% ownership (200 units), and even then it’s subject to manager approval

She can't rent the property without permission, even though she'd be paying monthly like an owner

The manager (seller) can never be removed from control until/unless she owns the entire LLC

The structure is kind of a mix between rent-to-own and seller financing, but it feels heavily weighted in the seller’s favor. Has anyone done or structured a deal like this before? Pros, cons, horror stories, or anything I should watch for?

Would really appreciate any advice or personal experience.

Giovanni Javier · Answer

Although I don't have any experience with this but based on my research this structure is sometimes referred to as a “membership interest transfer” or “LLC wrap,” and while it can be a creative workaround for certain legal or financing limitations, it’s absolutely critical to understand how lopsided these deals can become without strong legal protection.

A few red flags I see in this setup:

• No deed = no real ownership. Until she owns 100% of the LLC, she essentially has no enforceable real property rights. If things go south, she’s more of a tenant or investor than a homeowner.

• Default clause wipes all equity — that’s brutal. Most legitimate seller finance or lease option deals would at least offer some sort of recapture or forfeiture terms based on remaining equity.

• No ability to liquidate, transfer, or rent = zero flexibility. Even limited partnerships usually allow some rights before full ownership.

• Manager can’t be removed? That means no matter how much equity she earns, she still can’t vote the seller out? Major control risk.

This deal is framed like a rent-to-own wrapped in a membership share agreement, but with heavy seller bias and minimal buyer protection. I’d recommend:

1. Have a real estate attorney (preferably one who understands equity sharing and LLC structures) review the contract.

2. Ask the seller if they’d consider a more balanced seller finance model or wrap mortgage. These still offer flexibility without giving up control or enforceability.

3. Make sure there’s an exit strategy. What if your mom decides to move or passes away before owning 100%? Can her heirs inherit her units?

Bottom line: creative financing isn’t bad — but this version sounds like it protects the seller at every turn while putting all the risk on your mom. If they’re not willing to revise those terms, it might be best to walk.

Patrick Roberts · Answer

Sounds like a security to me. This screams of fraud. Seems like the seller is trying to use this as a workaround to foreclosing through the normal process.

Ned Carey · Answer

@Julyana Silveira I would not touch this.

As @Patrick Roberts said it could be a security and subject to securities laws. That is a mess you don't want to get involved in.

Also it is hard to do due diligence on an LLC vs a property. That LLC could have liabilities that you are not aware of. As an example the LLC could have owned a property in the past that is a lead paint or mold lawsuit waiting to happen.

There is no reason for your mom to do this unless it is a deal of a lifetime. Of course that would make me even more skeptical.

Anyone Familiar with LLC-Based Home Purchase Structures Like This?

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