Help with Rental/LLC Title and Deductions

[Daniel Doumani]

Hello - I am looking for help with the current structure of a rental business I started a few months back. I created an LLC partnership with a few friends. Each of us owns an equal percentage. We then went out and bought our first property. However, we wanted a 30 year loan with a good rate, so we decided to go the conventional route, instead of a business or portfolio loan. This means I actually took out the loan in my name, with my funds. The mortgage payment also includes the insurance and property taxes. The mortgage payment and rental income all flows through the business bank account. We are planning on going through a Quit Claim deed to move the title into the LLC for liability purposes. However, my thought on that is that the bank will notice that change and call the loan. My loan officer says they don't look at rental properties like that, but I find that hard to believe since they will get the tax statements. If I paid the taxes outside of the mortgage, then maybe we would be ok. The next issue is, all of the mortgage interest would be in my name. If we do not do a Quit Claim deed, all of the property taxes would also be in my name. This means there is no way for the LLC to deduct those expenses at all. They all have to be expenses on my personal return. I am really looking for some help and guidance here. Should I proceed with a Quit Claim deed or leave in my name? How is the LLC supposed to deduct any of those expenses if they are all in my name? Is the only real option to do a portfolio loan in the future so we don't encounter these issues?