All Forum Posts by: Matthew McNeil

Google "Wyoming Asset Protection Trust"

Try this link; https://www.biggerpockets.com/...

Are you a Filipina OFW living in Dubai inquiring about investing in the Philippines (you wrote "home country")?

The OP didn't clarify if he's the sole owner of the LLC. My mistake in assuming if he is. Most posts on BP regarding LLCs are referring to two members and I replied based on that assumption. A two-member LLC may choose to file as a partnership using a Form 1065. A single member LLC is considered as a Disregarded Entity in the eyes of the IRS.
 

When you QC a property into a LLC the mortgage stays with the original borrower. It does not transfer. If you borrowed $100,000 from xyz lender to buy a property then transfer the property to the LLC the loan stays with you personally.

BP members are evenly split 50-50 regarding the "Due on Sale" clause issue and most of the feedback you're going to get is opinion.  He's my opinion regarding this issue, as I've written on other posts;

The lender can exercise the "due on sale" clause if the name(s) of the buyer are not the same name(s) as the members identified as the owners of the LLC. For clarity; as with a trust, lenders do not exercise the "due on transfer/sale" clause when real property is transferred to the SAME individuals in an official capacity (e.g. Joe and Jane Smith as trustees of Smith Trust). Typically, the same applies to LLCs where you and your spouse are sole members (single or multiple member LLC).

If you take out a mortgage personally and transfer the property to your LLC that you control, you should be exempt. Also, if your loan was conventional; Fannie Mae recognizes the legitimacy of a QC between the mortgage holders and the LLC so long as the LLC is controlled by the borrowers;

If the property was owned prior to closing by a limited liability corporation (LLC) that is majority-owned or controlled by the borrower(s), the time it was held by the LLC may be counted towards meeting the borrower’s six-month ownership requirement. (In order to close the refinance transaction, ownership must be transferred out of the LLC and into the name of the individual borrower(s). See for additional details.)

I believe Freddie Mac follows suit. Here’s a BP post on the same topic; https://www.biggerpockets.com/forums/49/topics/610831-oh-yeah-the-due-on-sale-clause-is-now-llc-friendly-sometimes

Regardless, you should always talk to your lender and tell them exactly what you’re planning and get their approval.

Next is to check with the Title Company regarding the Title insurance. Generally, the coverage of the policy will state; “The coverage of this policy shall continue in force as of Date of Policy in favor of an Insured after acquisition of the Title by an Insured or after conveyance by an Insured, but only so long as the Insured retains an estate or interest in the Land, or holds an obligation secured by a purchase money Mortgage given by a purchaser from the Insured, or only so long as the Insured shall have liability by reason of warranties in any transfer or conveyance of the Title.” Again, as with the question regarding the lender mentioned above, its best to ask your Title company if the insurance coverage remains intact if the asset is transferred.

Unlike you, I am not an attorney, but this is what my attorney advised who specializes in real estate law. 

There's not much you can do if your LLC is only a "few months" old as you wrote because 1) you haven't filed a tax return for the business and 2) you probably haven't paid yourself a "Distribution." Once your business is more established - time wise - then you can take the Distribution as a payment into your personal account, which the lender will see on your personal tax return as reported on a K1.

One thing I wish I knew when I started? Well, I knew nothing about REI when I started. I guess I wish I knew more about leverage back then.

How would that increase the risk? I think you're equating "risk" to the possibility of the lender calling the note if they see a transfer. However, as I wrote above, the control of the asset remains with you if the members of the LLC are the same as the members on the note.

Regarding buying the asset in the name of the LLC. Some investors do, but many don't and they just transfer it to the LLC after buying it. It's also important to note that Quitclaiming an asset to an LLC doesn't transfer the mortgage. That stays with you. The loan is still in your name.

The lender can exercise the "due on sale" clause if the name(s) of the buyer are not the same name(s) as the members identified as the owners of the LLC. For clarity; as with a trust, lenders do not exercise the "due on transfer/sale" clause when real property is transferred to the SAME individuals in an official capacity (e.g. Joe and Jane Smith as trustees of Smith Trust). Typically, the same applies to LLCs where you and your spouse are sole members (single or multiple member LLC).

If you take out a mortgage personally and transfer the property to your LLC that you control, you should be exempt. Also, if your loan was conventional; Fannie Mae recognizes the legitimacy of a QC between the mortgage holders and the LLC so long as the LLC is controlled by the borrowers;

If the property was owned prior to closing by a limited liability corporation (LLC) that is majority-owned or controlled by the borrower(s), the time it was held by the LLC may be counted towards meeting the borrower’s six-month ownership requirement. (In order to close the refinance transaction, ownership must be transferred out of the LLC and into the name of the individual borrower(s). See for additional details.)

However, the more important question might be regarding the Title insurance. Generally, the coverage of the policy will state; “The coverage of this policy shall continue in force as of Date of Policy in favor of an Insured after acquisition of the Title by an Insured or after conveyance by an Insured, but only so long as the Insured retains an estate or interest in the Land, or holds an obligation secured by a purchase money Mortgage given by a purchaser from the Insured, or only so long as the Insured shall have liability by reason of warranties in any transfer or conveyance of the Title.” Again, as with the question regarding the lender mentioned above, its best to ask your Title company if the insurance coverage remains intact if the asset is transferred.