I am in the process of purchasing my second rental property in Phoenix AZ, I currently have one in Myrtle Beach SC. I have an LLC set up in SC but it is set up as a Partnership as I split the first rental with a partner. How would it work if I was thinking of putting the AZ property into the same LLC but was not going into this deal with a partner. IF the deed of the property lies with the LLC would this other partner own equity in the property ?
@Eric Kelly I doubt you or your partner would want to do that. You're getting into a messy liability setup there. Is it possible for you to simply spin up another LLC or just own this property outright as an individual?
@Eric Kelly Something to consider as well. If you have a residential mortgage there is something called an acceleration clause in every mortgage note. Basically, it says that if you change to title out of your name that the lender can request you change title back to your personal name or they can call the note due. This rarely happens, people put title in their LLC name all the time. But, be aware of that rule.
I have heard people getting caught by the loan servicer because they changed their home insurance into the LLC or partnership name as well. The lender reviews insurance annually.
Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.
Putting a property into an LLC makes it an asset of the LLC. Therefore, unless there was documentation separating it as a capital contribution or some other thing, it would be owned by all owners of the LLC.
Second, as a general rule, real estate holding LLCs should be created in the same state as the property. While some states have better protections for LLCs than others, when it comes to real estate courts only want to recognize local protections.
@Eric Kelly It is easy enough to create an LLC. Just create a new one in AZ for the AZ property.