Should I put property in LLC at Closing?

[Eric Hu]

Hello all,

I'm under contract for a duplex in Chicago right now and I was wondering if I should put the property into an LLC at closing or hold it personally for a while. The plan is to refinance the property in the future but I heard it would be difficult to do so with it being in a LLC. I've read about switching the property to my name, then switching it back after refinancing, but I'm worried about the lender calling it due. What would you do?

[Ben Leybovich]

If you are using conventional financing to purchase, you cannot close as an LLC. The bank won't close in any name other than your own. If you are wanting to refi using conventional financing, you won't be able to if the asset is in an LLC. Conventional Fannie/Freddie notes are only possible for individuals not corporate entities.

If you are going to close in your name and think you'll just transfer into a single member LLC, I'd get a written release from the lender. Transfer will trigger the DOS and Acceleration, giving the bank right to accelerate payment in full should they find out.

Thus, it is a trade-off. Do you close in your name, get better financing, but less asset protection, or do you close in a corporate name, get commercial financing, but more protection...? You choose :)