House Hacking

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Tori Magers
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House Hack into an LLC

Tori Magers
Posted Jul 29 2022, 12:20

Hello! I purchased a home about 4 years ago that I house hacked and now rent out. I want to move my mortgage into my LLC to limit my liability on the property. I was told by my mortgage provider to send the LLC Operating Agreement and the legal team would make a decision and let me know. I received the determination that FNMA (Fannie Mae) servicing guidelines do not allow for a transfer of ownership interest into an LLC. Anyone have advice on how I can do this?

Salt Lake City, Utah

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Brandon Rush
  • Real Estate Agent
  • Portland, CT
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Brandon Rush
  • Real Estate Agent
  • Portland, CT
Replied Jul 29 2022, 12:42

Hey Tori,

You could refinance the property and put it into an LLC. You could also quit claim deed the property into an LLC, but since you are now on the radar, I would not recommend it. To be honest, its probably not the end of the world if that property stays in your name. Just make sure you have good insurance/coverage for that property. I am sure there are many opinions on this, but thats just my 2 cents.

Good luck!

Real Estate Agent Massachusetts (#9576248) and Connecticut (#RES.0824703)

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Patrick Drury
  • Real Estate Agent
  • Columbus, OH & Cleveland OH
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Patrick Drury
  • Real Estate Agent
  • Columbus, OH & Cleveland OH
Replied Jul 29 2022, 13:06

@Tori Magers
It's not very hard, but it will just cost more and your rate will be more than putting the property in your personal name. You will want to look into refi-ing the property into a non-QM product like a DSCR loan. Although in today's climate with where rates are at, I would say just keep it in your personal name. You can't just change it into an LLC you would need to refi since a conventional loan can not be held by an LLC or business.

  • (614) 412-4565

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Tori Magers
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Tori Magers
Replied Jul 29 2022, 14:34
Quote from @Brandon Rush:

Hey Tori,

You could refinance the property and put it into an LLC. You could also quit claim deed the property into an LLC, but since you are now on the radar, I would not recommend it. To be honest, its probably not the end of the world if that property stays in your name. Just make sure you have good insurance/coverage for that property. I am sure there are many opinions on this, but thats just my 2 cents.

Good luck!


 Your opinion is very much appreciated Brandon! I am definitely going to beef up the insurance like you mentioned. Thanks again! 

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Tori Magers
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Tori Magers
Replied Jul 29 2022, 14:35
Quote from @Patrick Drury:

@Tori Magers
It's not very hard, but it will just cost more and your rate will be more than putting the property in your personal name. You will want to look into refi-ing the property into a non-QM product like a DSCR loan. Although in today's climate with where rates are at, I would say just keep it in your personal name. You can't just change it into an LLC you would need to refi since a conventional loan can not be held by an LLC or business.

Patrick - totally agree I much prefer my current rate versus where they are at now. I appreciate your insight this helps a lot.

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David M.
  • Morris County, NJ
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David M.
  • Morris County, NJ
Replied Jul 29 2022, 14:50

@Tori Magers

If you don't mind, lets just double check why you want to use a LLC: https://www.biggerpockets.com/...(LLC Misconceptions and Eduacation)

What you found out is correct. Conforming residential loans are not available to legal entities such as LLC's. So, if you are going to go down the LLC route, you will have to use "non-residential" lending which generally have higher rates (although its getting on par now) and worse terms. Yes, DSCR's are all the rave now.

Just make sure that you operate your LLC correctly to protect its corporate veil, otherwise it defeats the purpose of using the LLC. I've heard too many investors who use LLC(s) for single family rentals regret it. Remember, the corporate veil is a legal matter, not an accounting matter entirely... The top two are co-mingling funds and using the LLC as your alter-ego (just imagine the LLC as another person, a stranger to you, when transacting with it).

As for insurance, yes normally those who invest with their personal names use homeowner/landlord insurance with an umbrella policy (ref:  https://www.biggerpockets.com/...). FYI: even if your your properties were in a LLC, you'd have to or should get insurance anyway. One semi-stupid reason is so at least the insurance company will take over any lawsuit against you. Otherwise, you'll go bankrupt in legal fees protecting your corporate veil .

Keep your property(ies) in good repair to minimize the chance of getting sued.

Equity stripping is another way to limit your liability.  If you are highly leveraged, there is no equity for somebody to sue you for since the 1st lienholder would have to get paid off first...  In "normal terms," that just means in your early investing years you don't have a net worth for somebody to go after.

Oh, I suppose no chance you would move back into the home for two years before you sell to use the sec121 exclusion?

Good luck.

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David M.
  • Morris County, NJ
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David M.
  • Morris County, NJ
Replied Jul 29 2022, 15:05

@Tori Magers

Oh, forgot to mention don't forget to change your lease.  Many people forget to do that...

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Tori Magers
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Tori Magers
Replied Aug 2 2022, 11:05
Quote from @David M.:

@Tori Magers

If you don't mind, lets just double check why you want to use a LLC: https://www.biggerpockets.com/...(LLC Misconceptions and Eduacation)

What you found out is correct. Conforming residential loans are not available to legal entities such as LLC's. So, if you are going to go down the LLC route, you will have to use "non-residential" lending which generally have higher rates (although its getting on par now) and worse terms. Yes, DSCR's are all the rave now.

Just make sure that you operate your LLC correctly to protect its corporate veil, otherwise it defeats the purpose of using the LLC. I've heard too many investors who use LLC(s) for single family rentals regret it. Remember, the corporate veil is a legal matter, not an accounting matter entirely... The top two are co-mingling funds and using the LLC as your alter-ego (just imagine the LLC as another person, a stranger to you, when transacting with it).

As for insurance, yes normally those who invest with their personal names use homeowner/landlord insurance with an umbrella policy (ref:  https://www.biggerpockets.com/...). FYI: even if your your properties were in a LLC, you'd have to or should get insurance anyway. One semi-stupid reason is so at least the insurance company will take over any lawsuit against you. Otherwise, you'll go bankrupt in legal fees protecting your corporate veil .

Keep your property(ies) in good repair to minimize the chance of getting sued.

Equity stripping is another way to limit your liability.  If you are highly leveraged, there is no equity for somebody to sue you for since the 1st lienholder would have to get paid off first...  In "normal terms," that just means in your early investing years you don't have a net worth for somebody to go after.

Oh, I suppose no chance you would move back into the home for two years before you sell to use the sec121 exclusion?

Good luck.


Hi David! Thanks so much for this thorough response, I so appreciate it. What got me on the LLC hunt is after reading Rich Dad, Poor Dad (like every BP guest suggests to do) I read Start Your Own Corporation, which is in the Rich Dad series of books by Garrett Sutton. While I am not near the net worth discussed in the book it discusses in detail why you want your assets in LLC's. It did not go into detail on the type of loans and those specifics like I wish it did. Nonetheless a learning experience that I can carry forward as my portfolio grows and what assets will fit into the corporation. I did do a 15 minute consultation with their team and learned quite a bit about structuring LLC's and Corps which was also some nice applied learning. I am going to make sure that I have the proper umbrella policy coverage based on the link you sent - thank you again so much for your insight!