Investor · Meridian, ID · Member since 2015 · 24 posts · 19 votes
Hi everyone! I am new to the group and look forward to your advice! My husband and I have 2 rental properties in our name. The first one used to be our primary home so we left it in our name because we didn't know how to change it. Then we bought another property about a year ago and our loan officer said she couldn't do a loan for us in a business name. It was easy enough to finance it with our credit, so we went that route and now have 2 investment properties in our name. We would like to separate our liability and put them in a business name. What is the best way to do that? Will there be any tax consequences when we sell either home?
your question is state specific, the rules are differant in each state. You will want to talk to a real estate attorney to get the right answer for Idaho.
Now with that being said, there are several mechanisms that you could use, In most states you can either quit claim a property to another entity without a problem. You can also transfer a property into trust for estate planning purposes and asset protection. In my state of PA there are additional rules you need to deal with, but I dont want to go too far down that path.
The big hurdle you need to look out for is transfer tax, and how and when it is triggered in your state. That is where you need to understand the law of your state.
your question is state specific, the rules are differant in each state. You will want to talk to a real estate attorney to get the right answer for Idaho.
Now with that being said, there are several mechanisms that you could use, In most states you can either quit claim a property to another entity without a problem. You can also transfer a property into trust for estate planning purposes and asset protection. In my state of PA there are additional rules you need to deal with, but I dont want to go too far down that path.
The big hurdle you need to look out for is transfer tax, and how and when it is triggered in your state. That is where you need to understand the law of your state.
Great question @Becky Farnsworth ! I was actually wondering the same thing myself!
@Josh Caldwell would you happen to know about how this works for Delaware residents. Also, what if my business is in one state and the property is in another. Which states regulations would we need to follow ?
@Josh Caldwell thank you for your input. I have been told I can "quick claim" the houses, but do you think I could skip the attorney and just go to the county to quick claim it or is that a bad idea? I have an accountant so maybe I should talk to him about transfer taxes because I didn't even know that was a thing. Thanks for giving me an idea of where to go!
I'm with Josh on this one. Not all states tax transfers of real estate, but a local CPA or real estate attorney would be able to answer that in a second. The properties have probably been in your personal names for some time, so you might as well spend another day or two asking around locally so that you get things done right the first time, or at least without any surprises.
Every state is different on if you have to pay transfer taxes on quit claim deeds here in FL if you have a loan on a property and quit claim deed it to a LLC you will owe tax, but free and clear you won't. If you can easily transfer them I would put them in an LLC as you can treat as a disregarded entity for IRS purposes which means you can keep them on your personal return and not have to file a separate return. Be careful make sure if you have a loan the bank will allow the transfer search "due on sale clause". Also check with your insurance company as could effect rates. Good luck