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Updated 5 months ago,

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Transferring Title to LLC for a Seller Financed Property

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Hello BP Community, I have a somewhat tricky situation that I need help with - which may be a simple answer for you Real Estate experts! 

My brother and I purchased a home 18 months ago in which the seller wrote us a fixed 4.5%, 5-year mortgage note as an incentive for a quick closing. We closed on the property and the seller-financed mortgage together, under our personal names. My brother has lived in the home as his personal residence since, but we are now in the process of renting it out full-time using a property manager. 

We are considering transferring the title of our new rental into an LLC partnership. I have notified our lender (the old seller) in which they are fine with the title change to an LLC (with no due on sale clause), but are not willing to change the payee of the note, in which the mortgage will remain under our personal names. Obviously, we would like to keep the 4.5% mortgage for the next 3.5 years.

As such, is it worth transferring the title of the property into an LLC now, full knowing the seller note will remain in our personal names? Does this counteract the liability benefits of using an LLC in the first place? Is there any harm (mainly tax liability) in waiting 3.5 years and both refinance the mortgage and transfer the title together?

What would you do? Thanks!

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