Transferring Personal Name to LLC
Hello everyone,
I tried searching the forum for this answer but had no luck. I just got my first property under contract today and plan on BRRRRing it. I have my LLC already set up and am getting rates from two lenders - one conventional loan (if I put it under my personal name) and one commercial loan (if I put it under LLC). I am currently waiting to hear back my offered rates.
My question is if I go with the conventional loan and have the property under my name, can I simply just transfer the deed over to my LLC and still keep the mortgage under my personal name? The loan officer said the mortgage company does not care who owns the property, they just care who is making payments on the loan. Apparently I don't even have to tell the company that I am transferring the title. He says mortgage company still keeps the lien on the house regardless if its me or my LLC who owns it.
The reason I am asking this is because I would like to finance the property under personal name (due to better rates) and then transfer deed over to LLC (for liability purposes).
Does anyone have experience with this situation and can verify if this is accurate? Sounds too easy to be true. Thanks!!
I purchased my first rental property with personal name and conventional loan. The lease I put on is under LLC. the house and mortgage still under my name and I was thinking about doing the transfer later on or sell it. after fixing it up, at this moment I am just lost of how much tax or do a 1031 exchange if i have another property lined up. I am stuck at that point for now.
I have gone from personal to LLC. My understanding is that most loan docs will allow the lender to exercise the "due on sale clause" with the transfer if they would like. Most never do (but they aways can).
Hi @Peter Hoang
I may be the only one to give this advice, but mortgage it under where it will be held. If you want the protections of an LLC you can't "Comingle funds".
DISCLAIMER: NOT A LAWYER or anyone practicing law on this planet or another within the solar system.
However I would think if something happened it would take a competent lawyer about 30 seconds to say "The mortgage is under @Peter Hoang so the veil should be broken and we can go after his assets as well".
We all like the low personal rates, but I'd put it under the LLC if possible.
Just my 2 cents and good luck!
@Peter Hoang
I post on this constantly...
My layman's opinion is do not buy personally then transfer to LLC. Other than the due on sale clause and Title insurnace isssues... your lender doesn't care about your corporate veil.. they just want to sell you a loan. really nobody cares about your veil other than you and hopefully your qualified attorney..
Co-mingling funds is an "instant death" to your corporate veil. So, if at the end of the day your LLC has Title but you have the mortgage, who makes the mortgage payments? You or your LLC? Who takes the deduction — don't care about federal irs position on disregarded entities since LLC's are State entities subject to a State law regarding their veils...
You want limited liability protection afforded by the LLC? You realize the LLC has to own the asset with the liability. Well, a mortgage is a liability....
Using your LLC as a alter-ego is another no-no. So, let's look at this with two complete strangers doing this deal. So, you think it's normal for say you to deed to me (or even my LLC if it makes you feel better) one of your properties... most people would expect me to make the mortgage payments (on YOUR mortgage)... look for tenants and rent out the property... pay all the expenses and buy property insurance... and hand over all the remaining rent... all of this without any paper signed between us... hmmmm.... oh, when it comes time to sell you get all the profits... hmmm...
No one has yet rebutted me.. I wish somebody would.. nobody has shared a court battle, regardless of whether their veil was deem secure or not... I know it's complicated for one because it's state specific and the legalities depend on your circumstances (eg I personally see this being "okay" if after many years you need to "convert" to a LLC structure, but then afterwards showed you only purchased via your LLC).
None of anything is fool proof. But, why go through the effort and expense to create a weak defense? If you want the asset /liability protection of the LLC, purchasing it upfront and using commercial financing is just part of the costs for it.
If you want to chat about, I’d be happy to. Feel free to direct message me.
There is no need to put single-family into an LLC. Keep $300,000 liability on each house and have a $1 million umbrellas policy in place over all of your property for protection. Plus, moving it to an LLC is considered a sale and the note is due in full at that time.
Thank you guys for your help and advice! Looks like keeping them completely separate is the safe and sure bet.
Originally posted by @David M.:@Peter Hoang
I post on this constantly...
My layman's opinion is do not buy personally then transfer to LLC. Other than the due on sale clause and Title insurnace isssues... your lender doesn't care about your corporate veil.. they just want to sell you a loan. really nobody cares about your veil other than you and hopefully your qualified attorney..
Co-mingling funds is an "instant death" to your corporate veil. So, if at the end of the day your LLC has Title but you have the mortgage, who makes the mortgage payments? You or your LLC? Who takes the deduction — don't care about federal irs position on disregarded entities since LLC's are State entities subject to a State law regarding their veils...
You want limited liability protection afforded by the LLC? You realize the LLC has to own the asset with the liability. Well, a mortgage is a liability....
Using your LLC as a alter-ego is another no-no. So, let's look at this with two complete strangers doing this deal. So, you think it's normal for say you to deed to me (or even my LLC if it makes you feel better) one of your properties... most people would expect me to make the mortgage payments (on YOUR mortgage)... look for tenants and rent out the property... pay all the expenses and buy property insurance... and hand over all the remaining rent... all of this without any paper signed between us... hmmmm.... oh, when it comes time to sell you get all the profits... hmmm...
No one has yet rebutted me.. I wish somebody would.. nobody has shared a court battle, regardless of whether their veil was deem secure or not... I know it's complicated for one because it's state specific and the legalities depend on your circumstances (eg I personally see this being "okay" if after many years you need to "convert" to a LLC structure, but then afterwards showed you only purchased via your LLC).
None of anything is fool proof. But, why go through the effort and expense to create a weak defense? If you want the asset /liability protection of the LLC, purchasing it upfront and using commercial financing is just part of the costs for it.
If you want to chat about, I’d be happy to. Feel free to direct message me.
Thank you, all very helpful.
Quote from @Peter Hoang:
Thank you guys for your help and advice! Looks like keeping them completely separate is the safe and sure bet.
So, keeping the loan/property under your personal name, and leasing it out to tenants under LLC was the way you went?
Thank you.
Quote from @Stephen J Davis:
There is no need to put single-family into an LLC. Keep $300,000 liability on each house and have a $1 million umbrellas policy in place over all of your property for protection. Plus, moving it to an LLC is considered a sale and the note is due in full at that time.
Thank you for sharing.
My two properties, one primary res, other rental is under personal name loan/title
I currently have homeowner insurance on both, do I need to update the rental one to landlord insurance?
also, the umbrella would be both properties bundled I assume.
Thanks again.