Selling your primary residence to your LLC.

[Wayne H.]

I am wondering if anyone has ever purchased (not transfer, purchased ) their primary residence that they were currently living in using their LLC? If I can get an investor to loan me the funds, I would purchase my primary residence using my LLC, pay off my current mortgage, then put a new mortgage on the property( with a different mortgage company) and pay the investors with the funds I received from putting a new mortgage on the property. My questions are, has anyone ever done this, and what are the pros and cons if any?

[Wayne Brooks]

Why?  

[Bill B.]

Why don’t you just light several thousand dollars on fire and cut out the middle man?

[Carl Miller]

Pros: None that I can see.
I'm not seeing the upside to this transaction. It sounds like you're trying to complicate what should be a straight refi of your personal residence. Do you expect the private investor to lend you money at a lower rate than a bank?

Cons: Transaction costs. Headache. 

I think you should revisit the "why" of this transaction.

[Sean Morrison]

There's really not much benefit and the costs are pretty high. In order to move it to an LLC, you would need to deed the property to the LLC, which gets into due-on-sale issues with the mortgage company (see the many threads on that issue). As an LLC, you could lose any homestead exemptions for property taxes. Insurance rates (both homeowners and flood insurance) could go up significantly. But if you want to do it because you have significant liability concerns, then talk to an attorney first.

[Michael Plaks]

@Wayne H.

In addition to what was already said, private lenders will not normally lend on a personal residence due to legal complications in case of default.

[Wayne H.]

Thanks for the responses guys. I asked that question because I'm not eligible for a refi at this time because of low credit scores and I'm behind on payments so I was trying to figure a way out of this situation. 

[Carl Miller]

@Wayne H. Without knowing your situation, I’m going to just suggest that the first step out of the situation is not additional borrowing.

I’d say call the bank and tell them what you’re trying to do to remedy the payments situation and ask for some help. Then work on your personal budget and get your income situation sorted. How you got into this hole is not important. What’s important is that you take control of the situation now. I’m not judging you; I’ve been where you are. It’s terrifying and it forced me to reevaluate my personal priorities. But with faith, work, and humility, you can get back on solid footing.

I’m a big believer in ditching consumer debt a la Dave Ramsey. It’s not an easy row to hoe but the peace of mind is worth every sacrifice you make.

[Kerry Baird]

Maybe you can take on a tenant? Move to a cheaper property and rent this out.