Converting a property with personal mortgage to an LLC.

[Aydin F.]

Hi, I had two questions regarding the process of converting a personal property with a personal mortgage attached to it to an LLC. After communications with a lawyer and the mortgage lender we are in the following situation:

1) There is a balance due on sale clause in the loan files, the lawyer mentions a process of transferring the property into a land trust and taking advantage of Garn-St. Germain Act. to circumvent that clause. The lender is still persistent that we will need to re-finance the loan but the lawyer is persistent that won't happen. So I was wondering whether it is possible to circumvent the possibility of re-financing without being at the mercy of the lender or not?

2) Given that our names are already attached to the property, I was wondering that does turning the property into an LLC provide any benefits in terms of avoiding personal liabilities in case we get sued by a tenant or not? I have read on this forum somewhat contradicting views, some are mentioning that in our scenario doing an LLC is useless or probably it provides less protection than what we are expecting. I would appreciate if someone can shed some light on pros of LLC in our situation.

[John Underwood]

You don't need an LLC for one property that has a mortgage.

Just make sure you have adequate insurance of the correct type.

Add an umbrella policy if your still concerned.