Can I buy in my name and transfer to LLC?

Question

I have my first property under contract and my loan officer has been working with me for a couple weeks. She has the contract stating I will purchase under my LLC, however now she is saying underwriting considers it a commercial loan and they don't do those types of commercial. I'll need to purchase in my name.

Can I purchase in my name then transfer or assign it to my LLC? How does that work, how difficult is it, what are the considerations? The property is in Ohio.

Thanks!

Can I purchase in my name then transfer or assign it to my LLC?  How does that work, how difficult is it, what are the considerations? The property is in Ohio.

Thanks!

Russell Brazil · Answer

Why do you want to transfer it to an LLC? If it is for liability protection, then youll also need to refinance to a commercial loan, get a commercial insurance policy reflecting the LLC as the owner, and maintain separate bank accounts for the LLC.

If you dont do those things, then youll likely have an easily pierceable LLC.

Dave Kush · Answer

This comes up often. The answer is yes and no.

The reason I say no is that most mortgages will have a clause in there allowing the bank to call in the loan if you transfer your interest in the property.

the reason I say yes is that most of the time, they don't bother with this. They may not be aware or even be checking up on it. I have transferred properties into an LLC while I still have the mortgage. I always tell people that I think one thing to consider in this environment is whether you have a high or low interest rate loan. If you were sitting on a 3% mortgage from a few years ago, I would not transfer that, because if a smart banker saw that they realized they could call in the loan and get that money back out there at around 7%. Since you're getting the loan today, not likely it would get called in. It is at your own risk though.

Good luck. I personally find this to be one of the most frustrating parts of starting out.

John Mocker · Answer

John,

Remember that you need the Insurance policy to match the owner of property.  If an LLC owns the property, the Insurance policy should have the LLC as the named insured.  If you purchase in your name, the policy should be in your name.

Bill B. · Answer

Other than adding costs, complexity and wasting time what’s the purpose of transferring to the LLC? I ask because…

There is an almost zero chance you will get sued because of your rental.

There is a zero chance if you are used because of your rental you won’t also be personally sued.

There is a much greater chance you will do something personally away form your rental to get yourself sued in which case this won’t help.

If only the LLC is used. You probably aren’t going to do enough to prevent a lawyer from piercing the corporate veil and making you liable anyway.

You are making almost everyone more complicated and expensive regarding banking and tax preparation.

You won’t be able to refinance if rates drop without putting the property back in your name. How many times do you think you can do this transfer before the judge rules you and the LLC are one and the same? (Buy in your name, trance to LLC, transfer back to your name to refinance, transfer back to LLC? It sure seems like you personally bought it. Otherwise the LLC would have paid the higher rates like a real LLC.)

IF you are worth more than $1M you should already have an umbrella polciy, simply add thsi property to your polciy, might cost you $20/year, job done. If you’re worth closer to $500k, simply get $500k/500k limits instead of the standard limits. If you’re worth less than a few hundred thousand and just getting started. You can do the $500k limits or skip it for now.

Kerlous Tadres · Answer

I do not think it is complicated to transfer the property under an LLC after you close on your deal. I plan on transferring my properties under an LLC due to partnerships and etc

Jay Lutz · Answer

Makes sense.  In that case, are you recommending that us small-timers LLC or not?

V.G Jason · Answer

That one house you partner up  for and do is worth more to you(percentage wise) then one of the many buildings your architecture clients own. Think about that. I'd argue with the less you have, this house is worth more so the structure is of even more importance.

Jay Lutz · Answer

Do most of you keep your properties under your personal names then? And just set up separate bank accounts for the separate properties?If you buy a property with a partner (not your spouse), is it worth setting up and LLC in that case?

This is something I've been thinking about recently, too.  I'd assumed most people go the LLC route, because my architecture clients typically set up LLCs for their buildings.... But their buildings are worth millions to more than a billion.... So they are playing in a different sandbox than me. Maybe I should recalibrate my strategy for my pennies.

Brittany Minocchi · Answer

You CAN transfer title to an LLC, but the loan could be called due. If you're purchasing conventionally, Fannie/Freddie don't allow you to close in an LLC but there are other options that do allow it. Rate and cost for those types of business-purpose loans will be a bit higher compared to conventional. I also know of one lender (assuming their rules haven't changed) that will allow you to quitclaim to your LLC with no repercussions after 90 days. The downside is that their minimum loan amount is on the high side at $200k. This is problematic for investors here in OH specifically because of our lower cost of entry.

Can I buy in my name and transfer to LLC?

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