When to transfer title to LLC

Question

Hello!

When is everyone transferring their titles to their LLC's? I heard Brandon talking about how he uses private money, rehabs, refinances, and then transfers the title to his LLC. But how are investors getting around the due on sale clause?

Thanks for the insight! :)

Chris Seveney · Answer

I never transfer it into a LLC from my personal name - any good attorney will laugh at that if you think its asset protection. I either buy it in my personal name or a LLC. I do not flip flop back and forth between them.

Luis Alvarez · Answer

@Ryan Daniel  I will preface this with the fact that I have a legal background, specifically with estate planning and asset protection in relation to real estate investments.  However, this is not specific legal advice to you, just an opinion based on the circumstances described.

I know this is a differing topic on the forums, and online in general, but having the legal background/education and knowing estate planning concepts you'll realize it shouldn't be.  If one is transferring property title from personal name, a Grant/Warranty Deed would be drafted/recorded to transfer title.  NOT a Quitclaim Deed, as you may often see online, because Quitclaim Deeds do not fully warrant the rights and covenants of property as does a Grant and/or Warranty (or equivalent depending on state) does.  Most purposes that people on the BP forums are transferring properties to an LLC, would be exempt of the Due On Sale Clause.  There is statutory, and Fannie/Freddie guidelines, that explicitly exempt these transfers from being subject to the Due On Sale Clause...asset protection/estate planning purposes are covered.

There's always the question of "Do I Need an LLC to Invest in Real Estate?  The short answer is No, you don't need it.  A better question is "Should I have a rental property in an LLC?", the answer there (to me) is Yes.  I would never own rental properties in my personal name.  Yes, there are many out there that do it and nothing bad has ever happened, and that's great, but I just would never do that.  Relying on that logic is to rely on resulting.  Second, in terms of asset protection, LLCs are not invincible, but I think what many don’t understand is that they are not designed to completely shield your assets from liabilities, on the contrary they are designed to contain and isolate liabilities.

Brian Poppleton · Answer

Best thing is to check with attorney.  My attorney told me in 30 yrs he has never seen bank enact due on sale clause but he has seen multiple landlords get sued without LLC protection.  A lot of investors will buy home in their personal name to get better financing and then switch the title to LLC soon after closing.

When to transfer title to LLC

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