Converting personal investment property to LLC

[Srinath Gopinathan]

Hi Folks,

I bought a property in Harrisburg, PA about a few months back with a conventional loan on my name.
I would want to transfer the property to my single member LLC.

Reached out to an attorney. He mentions that it requires the mortgage to be on the LLC name. If I have to goto the bank, then the mortgage terms are going to change as it would be change personal mortgage to commercial.

Any ideas to avoid going in loops? Thanks in advance.

Regards,
Sri

[Stuart Udis]

@Srinath Gopinathan The attorney is referring to the due on sale clause. Technically once the transfer is completed the lender has the right to call the loan which would require you to refinance. Keep in mind you will also have to pay transfer taxes based on the properties assessed value, even if the property is transferred from your name to an LLC for a nominal amount + incur deed prep and recording fees.

What exactly is your reason for transferring the property from your personal name to an LLC? I believe additional context would be helpful. I ask this question because I suspect at least 90% of people who post on BP about entity formation or transferring properties from their personal name to an LLC cannot articulate the risk they believe they are protecting against. Meanwhile most who obsess over entity formation fail to carry proper insurance, work with unlicensed and uninsured contractors, fail to execute contracts, can't explain the difference between being listed as additional insured and certificate holder or request to be listed as additional insured on vendors insurance policies etc. These action items are far more important than entity formation but get ignored.