Transfer a Conventional Mortgage to an LLC: Risks vs. Upside

[Steven Taylor]

Hello Folks,

We have decided to hold an investment property in an LLC and are discussing financing strategies for the property and would like some advice.

Option 1: Get a commercial loan for the property under the LLC name and most likely pay a higher rate.

Option 2: Get a conventional loan under our name and transfer the property to the LLC.

We have heard the risks associated with Option 2 are:

1. The mortgage could be called because of a due on sale clause.
2. The property could lose its insurance coverage.
3. The LLC would not provide the protection we are looking to obtain due to a risk of "piercing the corporate veil" because we purchased it in our name originally.

I would appreciate any advice from folks who have first-hand experience with these scenarios!

Thanks,

Steven