Should I transfer my homes to an LLC

[Ben Narro]

I own 4 homes with mortgages, 2 are through the VA and 2 are conventional loans. I have over 30% LTV in all 4 homes. My question is should I transfer the homes over to my LLC? I know the down side would be losing out on capital gains saving, since my LLC will not be able to claim it. If I want to sell the home later, can I not just transfer the home back into my name and do a 1031 exchange? Or can I not just live in it for 2 years to take advantage of capital gains after I transfer it back in my name? Also if I put my primary residence under my LLC, I get that I lose out on homestead but all my home repairs are not tax write offs, correct?

[Stephanie P.]

@Ben Narro

Why not refinance out of the products you're in and get conventional funding to clear your VA entitlement and remove PMI if you have it.

I don't see the value of the LLC other than for commercial financing. An umbrella liability policy gives adequate protection and for most folks, it's enough. If you ended up getting sued by a tenant, I think a decent lawyer would be able to argue that your LLC is invalid because the 100% financing you've received is insured by the VA. Because that financing wouldn't have been available to the LLC, you benefited personally by not having to put money out and then the LLC may be considered invalid. Once you've co-mingled any funds you've pierced the corporate veil and you're personally liable.

You can get Fannie and Freddie financing up to 10 properties at a reduced ltv, so why an LLC until you've exhausted that stream of money?

Disclosure.  I'm not an attorney and do not play one on Biggerpockets, so consult your attorney for in depth legal advice.  Maybe some are right here on Biggerpockets.

One girl's opinion

Stephanie