How to get your properties into LLCs legally

Question

I’m wanting to move my properties into an LLC, but my properties still have mortgages with banks. What is the worlds advice on moving them over legally? Does everyone actually wait until the mortgage is paid off?

Brit F. · Answer

@Vivek Shah

Back in 2017, Fannie Mae quietly announced a change that allows transfers to LLCs under certain conditions:

• "The mortgage loan was purchased or securitized by Fannie Mae on or after June 1, 2016, and the LLC is controlled by the original borrower or the original borrower owns a majority interest in the LLC, and if the transfer results in a permitted change of occupancy type to an investment property, such change does not violate the security instrument (for example, the 12 month occupancy requirement for a principal residence)."
• The loan needs to be owned by Fannie Mae for their rules to apply.  Use their loan lookup website to enter your loan information, and it'll tell you if Fannie Mae owns it or not.  (If the loan isn't owned by Fannie Mae, you're at the mercy of the servicer/owner of the loan on whether or not they'll allow the transfer)

Contact your current loan servicer to request a transition and have your LLC docs ready to submit.  I haven't found a standardized fee structure for the transfer.  Theoretically, if the servicer handles both the loan transfer and deed transfer, there would certainly be a legal fee and recording free to change the deed/title with the county.

Pleasantly surprising, when I asked my servicers about LLC transfers, they all knew what I was talking about.  I expect to officially start the process this week or next.

Caleb Heimsoth · Answer

@Vivek Shah a title company can do this for you.  I know one in memphis who will do this for 50 bucks a property.  Very easy.  A CPA wouldn’t be the right person to do this

Caleb Heimsoth · Answer

@Vivek Shah I believe it was saddle creek title

Caleb Heimsoth · Answer

@Vivek Shah you’ll violate your title insurance if you do a quit claim deed.  Really the best way is to just use financing that allows for LLC which is probably a commercial loan, cash also works.

If you have a residential loan (30 year fixed for example), then probably just leave it in your name

Vivek Shah · Answer

Thank you all for the advice and opinions. I will look to make sure my loans have been sold to Fannie and proceed with moving them over. Do you guys suggest letting a tax consultant doing this for me or is this an easy process to take care yourself? Thanks again!

Matthew McNeil · Answer

Not necessarily.

My Title policies state; “The coverage of this policy shall continue in force as of Date of Policy in favor of an Insured after acquisition of the Title by an Insured or after conveyance by an Insured, but only so long as the Insured retains an estate or interest in the Land, or holds an obligation secured by a purchase money Mortgage given by a purchaser from the Insured, or only so long as the Insured shall have liability by reason of warranties in any transfer or conveyance of the Title.”  Its best to ask the Title company if the insurance coverage remains intact if the asset is transferred.

Chris Sukala · Answer

@Vivek Shah my accountant is wanting me to move all my properties into my LLC. I need to also figure it out.

Mark S. · Answer

Disagree w the above.  Get both.

Jaysen Medhurst · Answer

@Vivek Shah, if your mortgages have been sold to Fannie, they explicitly allow transfer of title to a LLC.

Vivek Shah · Answer

@Caleb Heimsoth do you have that contact info for the person in Memphis?

How to get your properties into LLCs legally

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