LLC'ing existing properties

6 Replies

Hey People - 

My wife and I own 3 single family homes (including our primary home) they are all in our names, and we are in the process of selling 1 of them in Scottsdale and use the profits to invest in a new property on the east coast.  

The question is, we would like to start an LLC for our properties, but we don't know if we could consolidate the other properties into the LLC when we form it without too much additional costs.

Is it possible?  Is there any way to consolidate multiple properties under the same financial product?

Thanks in advance.  :)

Yes, you can and an LLC makes this pretty easy. Basically you just transfer your personal assets to the LLC in exchange for membership shares. While it is easy to do on paper, you need to consult a tax advisor and a small business attorney to make sure you do it right. Otherwise your going to get the bejeezus taxed out of you. I would however recommend that you create an LLC for each of your rental properties. IN PA i believe it is only like $125 for each LLC, however it will protect your other rental from an lawsuit against one. If they are all in the same LLC a lawsuit against one is against all assets in the LLC.

Talk to a business lawyer that deals with this like Sultlaw.  

Awesome info, thanks William.  How about financial products that outside of residential mortgages, that consolidate multiple RE assets into 1 loan?  has anyone used, heard of, or experienced a product like this?

If I am right about what your asking, yes I believe so, I think they are called umbrella loans, but I don't know much about that or if those are just for commercial loans, someone else is going to have to help you on that one.

Just keep in mind that most loans written have a call option.

If you transfer ownership of the property without a new loan it's possible your lender may immediately demand full payment. From what I hear that is pretty rare as long as payments keep coming in uninterrupted.

@Joseph Duff  

Most advisors will tell you to have an LLC for every 5 properties or so. That limits your risk without too much paperwork and bank accounts.

In AZ the LLC will run you about $100 including the newspaper posting. Go to AZCC.gov for the paperwork.

Once you setup the LLC you can use a title company or deed company to transfer into the LLC. I haven't used them but you can call Deed Resource 480-558-7911. They were referred to me by my title company. 

As for the due on sale clause kicking in with your mortgage company, that is very unlikely from my understanding.  It's very common and I have never heard of a bank calling a loan due for that reason. 

I have no experience with blanket loans but unless you have a lot of equity and are taking cash out, I would not think that the rates would be better than what you currently have. 

@Joseph Duff I *think* you can put the properties into a trust then make the LLC the beneficiary of the trust. Putting properties in a trust is a normal asset protection measure that anyone can do and would not cause the bank's due on sale clause to come due. In that way, you can keep your owner-occupied financing but have LLC asset protection. At least that's how I understand. I haven't tried to do it myself as of yet.

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