How do I transfer my mortgage into an LLC

Question

So, I purchased a 3 unit apartment building using a HELOC loan.  I purchased it under ownership of an LLC for liability purposes and also because I plan to buy a few more rentals in the coming years.  The plan was to fix it, rent it and then do a cash out refi to pay back my HELOC (BRRR).  There were a few bumps with the fixing part but ultimately, everything seemed to work out except for the refi.  I used a residential mortgage broker. Throughout the whole process I was never clearly informed that I would be required to quitclaim the deed into my personal name.  After sending the refi docs to my accountant for review, he pointed out that the building was no longer under the LLC ownership and has urged that I get it transferred back.  I talked to a real estate attorney and he says I just need to quit claim the building back to the LLC, but I will need the lender's permission.  The mortgage broker does not think that is an option and explained that there is no bank that would lend to an LLC and that is why they had to transfer the deed to me personally.  I would hate to have to refi again due to the crazy fees.  Based on internet research, it seems I could do the quit claim, but risk the lender calling the loan.  Also, I saw something about transferring title to a Trust with the LLC being the beneficiary.  I really need some advice on what to do to fix this.  Also, moving forward what are my lending options if I want to own more property under an LLC?  Is there a certain type of attorney or professional that I should be seeking out for help?

Mike S. · Answer

First avoid using quit claim deed, use instead a warranty deed to avoid future title insurance issue.

Second, by putting your property in a land trust where you are the initial beneficiary, you would not trigger the due on sale clause (Garn St Germain Act). You would then later assign the beneficial interest to your LLC. As this assignment is private it would not trigger the due on sale clause. Also you will avoid all the recording fee of all your deeding back and forth.

Daulton H. · Answer

Dolores, I second @Stanley Bronstein .  Pay for a good Real Estate Attorney and explain to them your goals. Do research on the topic so you are aware of the basics and can understand what their advice is.  I am very into DIY everything and after a lot of research, I still pay for this service.   Loads of data on youtube as well as here on BP on this subject.  Get after it.

Carl Fischer · Answer

@Dolores Gonzalez

This is right up there next to killing Superman. If you quit claim it to the LLC as @Martin Neal suggests it most likely will be fine. However you also run the risk of piercing the corporate veil by having your personal credit on the line. Thus nullifying the whole asset protection with the LLC make sure insurance covers you and the LLC

The best way, in the future, is to develop a relationship with several banks and look for non recourse loans that make loans to LLCs. Deal with commercial loan officers that understand the process. You may have to pay slightly higher rates. But then you have the best of both worlds.

Stanley Bronstein · Answer

@Dolores Gonzalez. Hire a knowledgeable real estate lawyer and let them clean things up properly. It will cost money, but at the moment, you have what appears to be an unfortunate mess.

Martin Neal · Answer

@Dolores Gonzalez This is a common issue when investing in real estate. Understand that the lender “could” call the loan due but it is low Probability. They want to make money off of the amortization of the loan. Calling the loan due will cost them money because you would likely need to refi with someone else to get them there money. They ultimately lose. Most banks understand this so it’s not in their best interest to do so. Many investors talk about the Due on Sale Clause on BP as well as the podcasts. Most investors say if they call you out on it, just put it back and all is well. Going forward, to avoid this problem you will have to find a Lender that works with real Estate investors. They do charge higher rates but they allow you to keep the property in your LLC.

Michael S. · Answer

As @Carl Fischer mentioned, you essentially have already pierced the corporate veil on this property.  The property should have been purchased by the LLC itself, and the loan should have been originated with the LLC as the sole name on the loan.  Any other manner essentially throws the asset protection by the LLC out the window.

I suppose you could "sell" the property to the LLC itself, but now you are spending a lot of money on closing costs in this manner.  However, it would be much "cleaner", as the LLC then is recorded as the sole legal owner, and the loan is issued solely to the LLC for the purchase.  That way, in theory, you have restored the "veil" of asset protection.

Disclaimer - I am not a lawyer, and no legal advise is being offered.  Only my 2 cents from experience.

How do I transfer my mortgage into an LLC

Most Popular Reply