How do I get my rental property out of my name and into my LLC ?

[Heather Burnell]

Hello. I purchased my first rental property in February in Spokane, WA. I secured the loan in my name and formed an LLC that I wanted to put the property in. I happened across an article on the internet regarding an "escalation clause" that some lenders have in loan terms. It means that if you transfer the name of the title, then the entire balance of the loan is due immediately. This meant that if I wanted to change the title on my house to my LLC's name I would have to pay off the loan in order to do so. I contacted my bank (credit union) and asked my mortgage specialist if this clause was in my loan. She didn't know but asked her supervisor and they discovered that yes, there is an escalation clause in my loan. She told me that the clause is buried so deep in loan rules that most real estate lawyers don't even know it exists. She said Fannie Mae, Freddie Mac, US Bank, and other lenders have the clause.

I am looking to purchase another property soon. A friend who has dozens of properties, all in different LLCs, told me I will need to form an LLC and apply for a commercial loan under the LLC's name in order to get the title in the LLC's name.

Has anyone else come across this issue? Is there a way to get my first rental into the LLC without having to pay the loan off immediately or refinance?

Also, is the information my friend gave me about getting a commercial loan in the LLC's name accurate?

Any information is greatly appreciated.