Real Estate Agent · Colorado Springs, CO · Member since 2019 · 26 posts · 15 votes
This is my forum post. Over the last year I have purchased via traditional financing, rehabbed, and successfully rented out several properties. While these properties are owned by me personally my LLC manages them… All rents and expenses funnel through the LLC. My personal goal this year is to have 5 rentals under my belt. I'm at a point now where I think I should better protect myself and as the cash flow begins to increase I'd like to maximize my tax benefits by fully transferring over the property titles to my LLC. I know that this could cause a due on sale to kick in from the banks that currently hold the mortgage, but outside of that what is the best type of transfer to maximize my protection and to also allow me to begin from an accounting standpoint fully running everything through the LLC?
Looking forward to some experienced advice. Thanks!
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
7y
@Keith Andrews there is no tax benefit to an LLC, as it is a pass through entity for the IRS. Talk to your CPA about that. A titel company can quit claim deed them for you, but you should research more if that catullay makes sense. It would only help if you have them in seperate LLC's. Brandon Turner has a great video about LLC or not; you will find it on YouTube. Consider an umbrella insurance policy.
Attorney · Austin, TX · Member since 2019 · 128 posts · 98 votes
7y
@Keith Andrews Hi Keith, great question and one I see frequently working in asset protection. A transfer to an LLC will trigger the clause and should therefore be avoided, even though banks are hesitant to ever foreclose as long as the note is being paid. Despite the note being paid, the banks still send threatening letters. This issue can be avoided completely though by transferring the property into a land trust.
While a transfer to an LLC will cause alarms at the bank and prompt them to send you a letter, a transfer to a trust will not. A transfer to a trust is exempt from due on sale violations since banks will view transfers to a trust as an estate planning tool, meaning no threatening letter from the bank.
This article can explain the general process of taking a property into your own name and transferring it into the Land Trust before assigning it to the LLC. The added benefit of this process is that you can also have your attorney sign the public records as "Nominee Trustee" before assigning yourself as the "Trustee" once the Trust has been established. It means your name does not appear on public record for that property, your attorney and their address is the only thing that appears. All the while, you always have control and nobody else, not even your attorney, can manage or sell your property except for you.
If you need to prove ownership for financing or any other reason, you simple produce your company documents as well as your banking and accounting records. Since these disclosures are private, and not part of the public record, it does not violate the anonymity you’re seeking.
Please feel free to connect with me if you’d like to know more.