Quit Claim Deed to LLC Tax/Legal Question

[Danielle DeCormis]

I am looking to purchase a property that falls under the minimum limit for DSCR but qualifies for a conventional loan. If I purchase this and quit claim deed it to my LLC, who pays the mortgage? Me or my LLC? Does this raise any red flags for the mortgage company? Can they call the loan even if I'm a sole member of the LLC and the originator of the loan? Can I still claim the tax benefits for this property under my LLC? So many questions... I did leave a message for my tax guy, but I need to put in this offer ASAP so hoping I can get answers here.

[Patrick Roberts]

You have three separate categories here: lending, legal, and tax.

For the lending side, the lender has a clause in the loan documents in 99.9% of loans that allows them to "call" the loan if their is a change in ownership of the property. They generally do not do this because either they are not aware of the changes or the loan is seasoned and performing so they are deliberately turning a blind eye. In the handful of cases that I'm aware of, the lenders found out when changes were made to the insurance policies for the properties (the lenders will get notifications by letter of any changes to insurance policies where they have an interest). I know of at least two occurrences where the investors had to move the properties back to personal ownership under the lender's threat of acceleration of the loan.

For the legal and tax side, I'm neither an attorney nor tax professional. My very limited understanding is that the mortgage being in your individual name and you operating the property through a single-member LLC makes piercing the corporate veil fairly easy and that insurance coverage is typically a better protection plan. I could be wrong here, though.