Can I transfer a house I own to an LLC?

[Nathan Shankles]

I have an SFH and a duplex as rentals, both with mortgages in my name. I want to protect myself and my family from lawsuits and was told by a friend to start an LLC and transfer the properties into that LLC. Since I have mortgages on them, and since most mortgages have the due on sale/transfer clause, I'm wondering will they actually exercise that clause if I transfer the properties to my LLC?

[Account Closed]

@Nathan Shankles, I did this same thing with my first rental. I purchased the house and lived in it between 2016 and 2018, where in 2018, I moved in with my at the time girlfriend (now wife) and rented it out. You will be able to move the title/deed of the house in to your LLC by using a Quitclaim Deed. You will need a lawyer to write this for you. Once you have that, you can go to the county assessor's office to file.

However, as you alluded to, there are some risks. First, you need to look at your mortgage to see how long you have to live in the house before you can start renting it out and stuff. For example, mine was one year, which I met. Second, you will most likely be unable to move the mortgage in to your LLC. I tried doing this with my bank and they wouldn't let me. Third, if the bank wanted to, they could probably evoke the due on sale cause, but so long your paying your mortgage on time, they shouldn't care.

So the benefits of doing this is if a tenant sues you, so long your LLC (make sure you have an operating agreement) is set up correctly, your personal assets should be protected and the tenant will only have claim to assets in the LLC. The worst case scenario will be that you lose the house and any other assets in your LLC (cash or other properties), while still protecting your personal assets (401k, savings, your personal house, etc.). Additionally, the bank will then call in the mortgage, which you will have to pay from your personal assets as its still in your name and there is no collateral against the mortgage anymore.