Do you have to own a property free and clear to put it in a LLC?

[Matthew Schmitz]

Hi everyone, my question is can I have a mortgage on a property and transfer it into a LLC, or does it need to be paid off first, and also I have been told banks wont lend to a LLC if you try to buy a single family home investment property?

Thanks!

[Bob Okenwa]

Hi Matthew,

You can have a mortgage on the property and still move it to an LLC. Just be aware that by doing so, you will have triggered the due on sale clause and the lender can request that you pay off the loan immediately. Most people have said that it's never happened to them, but you don't want to do something that could lead to issues so be wary.

There are banks/credit unions that will lend to LLC's but the loans will be commercial loans and require 20%-25% down. You may just have to search for smaller, regional banks rather than the big box ones.