Rental Title to LLC?

Question

Hey Everyone,

I have recently created an LLC for my rental portfolio.  Does anyone have experience transferring a rental property to an LLC from their personal name?  I'm assuming you would need to seek a whole new loan?  Please advise!

Steve Smith · Answer

Zach,

Good advise but LLCs are a PITA. Trusts work just fine. There's very little exposure with a trust, as no one knows the beneficiary and the trustee is protected by law. And once you learn trusts, you can make all you want, easy without costs and without anyone knowing about them. I've use them for over 40 years, never been sued against the trust, and of the few law suits against the property manager we never lost one. But in the past 20 years, learned how to totally eliminate that.

Insurance is your first line of defense, and being anomalous (trusts), works great.

Account Closed · Answer

Hey @Kory Santaella, checkout my asset protection tier list below, hope it helps!

Worst:

–  No coverage, held in your name.

Bad:

• Relying on insurance. This is the most basic level of protection and it is not very effective, but it is still better than nothing. Insurance companies have many exclusions and they may not cover everything, but they can help to pay for some of the costs of a lawsuit.

Good:

• Using one LLC for all of your rental properties. This is better than relying on insurance because it protects your personal assets from liability. However, if someone sues you and wins, they could take all of your rental properties.

Better:

• Using a separate LLC for each rental property. This is the best level of protection because it isolates each property from the others. If someone sues you and wins, they can only take the LLC that owns the property that was involved in the lawsuit.

Best:

• Using a combination of LLC and land trust to protect your rental properties. These are more complex legal structures that can provide even more protection than a traditional LLC alone.

Here are some of the key things to keep in mind when choosing an asset protection strategy for your rental properties:

• Your risk tolerance: If you are not very worried about being sued, you may not need the best level of protection. However, if you are worried about being sued, you should use the best level of protection that you can afford.
• Your state laws: The laws governing asset protection vary from state to state. You should consult with an attorney in your state to make sure that you are using the best asset protection strategy for your situation.
• Your budget: The cost of asset protection can vary depending on the type of protection that you choose. You should make sure that you can afford the cost of the protection that you choose.

Michael Smythe · Answer

@Kory Santaella

Usually, it's NOT a good economic decision to refinance mortgages just to put the properties in an LLC. You'll pay a lot in fees! Current rates make this even more unappealing.What type of mortgages do you have? If they are FNMA mortgages created in last 10 or so years, you can transfer to a single-member LLC owned by the mortgagee with no due-on-sales clause violation.

Kinju Dudhia · Answer

We have used Title company in the past to transfer our rental properties to LLCs.

Michael Hill · Answer

can you point me to some resources that I can use to become educated on trusts?  We're looking to begin financing, etc for a multi family that we plan to house hack.

Thanks !

Stuart Udis · Answer

It is most cost effective to purhcase the property in an LLC at the start. Keep in mind you will also likey be paying transfer taxes on assessed value of the property in order to complete the transfer even if transferred for a $1 or a "nominal amount". Accounting fees will also go up because you have to address basis. I am an advocate for owning real estate in an LLC if done correctly and for a number of reasons related to asset protection that are not ordinarily articlulated on here but most who do purchase their real estate in an LLC fail to operate the LLC's correctly and fail to enjoy the benefits.

Dean Valadez · Answer

Does this transfer the deed from one's personal name to the LLC then? Is this necessary? What happens if one does not do this but is paying the mortgage and the other bills with the LLC, and the rent is submitted to the LLC? Thanks for any insight!

John Underwood · Answer

@Kory Santaella

If these have mortgages you don't need them in an LLC.

A LLC can also give you a false sense of security.

You may be subject to due on sale clause on your low interest rate loans.

Rental Title to LLC?

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