Just Need Confirmation: Transferring Rental Property to LLC

[Dean I.]

I have already read a lot of threads on this, I just want to confirm what I know and make sure I am on the right track and not missing anything important.

1. When transferring a rental property from your personal name to the LLC, you are really just transferring title, as most banks will not also transfer the loan.

2. This seems to me that it wouldn't really add any asset protection though, since the loan is still in my name and I am sure that the veil can be pierced as a result.

3. Where it would be beneficial is on the business side. Since the title would now be the name of the LLC, I can essentially run all the finances from that rental through the LLC, showing that the LLC is making a profit and thus giving me the ability to acquire other properties in the name of that LLC without any issues.

4. Biggest cons are the due on sale clause (which I already confirmed with my bank will not be an issue when transferring title) and the fact that eventually I will run out of properties I can do with 30 year mortgage (10 properties), unless I do a 1031 exchange.

With all that being said, my plan is to purchase properties that cash flow well with a 20 year amortization in the name of the LLC and those that only cash flow well with a 30 year amortization, I will purchase in my personal name and then transfer title to the LLC. That way, regardless of who's name is on the loan, all the income runs through my LLC.

Please let me know if I am missing anything or if I am on track.

[Steve Vaughan]

The biggest risk isn't the DOS clause of your mortgage, it's insurance. Most don't bother to run it by the title co for title insurance check or their property insurer. In the name of asset protection, they are no longer named as the insured on either. Will a future buyer be able to get title insurance? Who cares. We're sophisticated.

You can mess with putting little houses with debt into LLCs if you want to. Hope you don't ever have to refi. Hope it doesn't Jack up a future 1031 or other exit strategy.  I like LLCs for my commercial apts and have a few, but not residential.