Personally owned/pruchased, transfer to LLC

[Alik Levin]

Dear all, hi!

Newbie here, just starting out.

I am purchasing townhouse for rental purposed, title owned in my name and obtaining mortgage in my name. Planning to transfer the title after closing to LLC owned by me for the better legal protection. Two concerns:

1. Would this move warrant IRS to see the mortgage for the rental property I took in my name as recourse debt and deemed money distribution thus taxing me?

2. Would this trigger the bank that I personally signed the mortgage with require to pay in full or foreclose?

Please advise.

Thank you

-Alik

[Edward B.]

@Alik Levin,

Corey is not totally correct. Would this trigger the bank to accelerate your loan and require you to pay in full, no. Would it violate the due on sale clause in your mortgage and allow them to do so if they choose to, absolutely!

The reality is banks rarely exercise their due on sale clause as long as you are paying. BUT, sometimes they do. There are examples of that very thing happening right here on BP.

I can tell you that I have done exactly what you are proposing and have had no issues in 10 years, but you should be going in with your eyes open and understand the consequences. I'd hate for you to be the 1 in 1,000 who gets called out and back here lamenting about the poor advice you received on BP. Just understand the risks and have a mitigation plan in place.