I am renting out my condo in New Jersey and am going to have it managed under a LLC. However, I am unsure that my lender will allow me to transfer title from myself, to the LLC (I am the sole owner and manager).
In the event the lender will not allow me to transfer the title from myself to the LLC, can I still manage the rental under the LLC, but continue to have the mortgage under my name? Does this defeat the purpose of owning a LLC?
Any advice/insight is greatly appreciated. Thank you!
Rental Property Investor · Salem, OR · Member since 2017 · 696 posts · 660 votes
7y
If you do not already have the LLC setup I would not set it up, just get a good landlord insurance policy (i.e. make sure your insurance company knows you are renting the property) and add on an umbrella liability policy. If you already have the LLC, it is not a bad idea to run the income and expenses through it to keep it separate for taxes etc, but the bank almost certainly does not want you to transfer title...they might not do anything about it or they may make you transfer it back.
I am renting out my condo in New Jersey and am going to have it managed under a LLC. However, I am unsure that my lender will allow me to transfer title from myself, to the LLC (I am the sole owner and manager).
In the event the lender will not allow me to transfer the title from myself to the LLC, can I still manage the rental under the LLC, but continue to have the mortgage under my name? Does this defeat the purpose of owning a LLC?
Any advice/insight is greatly appreciated. Thank you!
If the bank expresses they may exercise the Due on Sale Clause in the case of a transfer into the LLC, you can also go the route of using a land trust as outlined in this article. The problem with just using the LLC as a pass-through entity is that you will not be getting the liability protection. You can also use insurance, but they only cover you for one type of liability: accidents. The issue is that insurance companies structure the language about exclusions in such a way that they may still refuse bigger claims - so I always recommend using the LLC as an additional "stop-gap" to keep yourself safe.
This isn't legal advice, just my opinion as a real estate investor.