Name on Mortgage but Deed in LLC for liability Protection

Dallas, Texas
General Landlording & Rental Properties
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Name on Mortgage but Deed in LLC for liability Protection

Raymond Kalonji
Member since 2023 · 13 posts · 4 votes

Hello,

I'm moving out of my primary residence on which I have a residential mortgage in my name to another house that will become my new primary. I plan to rent my current house, so I asked the bank if I can put it in an LLC without having to refinance. They said that I can put the deed in an LLC but the mortgage will have to stay in my name otherwise it will become due. If I do that, meaning deed in LLC but mortgage in my name, and God forbid renters sue, can they come after me and my other assets since the mortgage is in my name? With this setup, will I get any tax benefit?

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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
2y

The LLC will be easily pierced. If you want it to actually provide liability protection, youll need a seperate bank account, refinance the mortgage to a commercial loan, and get new commercial insurance with the new owner of the property, the LLC.

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  • Jason WrayPro Member
    Banker · Nationwide · Member since 2020 · 2k+ posts · 1k+ votes
    2y

    Your bank is just telling you that you must remian on the "Debt obligation" a.k.a promissory note but you can put the Deed in the LLC. It comes down to title vesting not mortgage note so you will be fine and your LLC will assume liability. You must remain on the promissory note offering a required personal guarantee. The deed/title can be quit claimed into the LLC for liability protection.

    Typically a DSCR or Portfolio loan allows you to close in an LLC or quit claim after the fact with no issues from bank/lender. Just in case you want to avoid this hassle down the road!

    [email protected]727-637-4289
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  • Raymond Kalonji
    OP
    Member since 2023 · 13 posts · 4 votes
    2y

    Thank you for the detailed answer. If I may also ask, I plan to be the landlord and not use a property management company, at least for now. Does that expose me to some personal liability? If yes, how can I mitigate that? Should I give myself the position of landlord in the LLC holding the deed?

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    2y

    The LLC will be easily pierced. If you want it to actually provide liability protection, youll need a seperate bank account, refinance the mortgage to a commercial loan, and get new commercial insurance with the new owner of the property, the LLC.

    [email protected]301-893-4635Podcast Guest on Show #192
    District Invest Group546 Reviews
    WebsiteView Page
    1Reply
  • Michael SmytheBusiness Member
    Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
    2y

    Not an attorney, so can't comment on how the LLC protection veil may be pierced.

    Can tell you that the best protection an LLC gives a rental property owner is some anonymity. But only if you have someone else act as your Registered Agent and don't use your mailing address.

    Leaving the mortgage in your name will inevitably lead to spam mail ending up at the property with your name on it - negatively affecting your anonymity:(

    If you hire a PMC, tenant may not catch or be able to do anything with the info. 

    If you DIY manage, they will connect the dot and know you are the owner.

    Logical Property Management4.9453 Reviews
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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y

    @Russell Brazil

    ^^^^^^^^ this right here

    I Wish everyone would read this post.

    7e investments53 Reviews
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