The bank won’t allow me to deed my property into an LLC.

4 Replies

The bank won't allow me to deed my single family rental into an LLC... what should I do next? Just use an umbrella policy until I sell this property and buy a new one that can be deeded into the LLC upon purchase?

Of course, if you ask they will say 'no' because it could create issues for them later.    Mechanically, you don't need their permission to do it.  However, they have a legal right to call the mortgage due if you did so (although that is a rare thing).

Some people only think about LLCs for defense, but there are actually many lines of defense against a lawsuit.  Here is how I think of it from most basic to most complex:

1) Good management - Don't do stuff to get yourself sued

2) Be nice - Average doctors who are nice get sued less than good doctors who are mean

3) Have insurance - Ideally get $500K or more of liability

4) Have a mortgage - paid off properties are lawsuit magnets

5) Get an umbrella policy - Extend your liability coverage to $1M or $2M

6) Entities - Use of LLCs, trusts, and holding LLCs   How much effort you want to put into this should also reflect your  situation.  For example, if you don't have a lot of net worth, you aren't much of a lawsuit target.  And, you might do things differently for a $50K house than a $5M apartment. 

@Phillip Scalise , does the bank still hold the loan or did they sell it to Fannie/Freddie and now just service? Fannie Mae explicitly allows you to move title into a LLC. If they still hold the mortgage, start shopping around for a refi. Then take the terms to your current bank and see if the loss of business doesn't change their mind.

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