All Forum Posts by: Mohit Arora

"Thanks, Alan! I really appreciate your feedback. That definitely gives me a better way to navigate the DOS clause risk. Thanks again for sharing your expertise!"

Mohit

I live in Austin, TX, and own few rental properties. Recently, I created a Series LLC with separate DBAs (per advice from my CPA), but I haven't done the deed transfers yet.

My main concern is the due-on-sale clause – if transferring the deed to the LLC triggers an issue with my lender. I asked my CPA if I should check with my mortgage company before transferring the deed, but they advised that I just do the transfer through an attorney and not explicitly inform the bank.
A few attorneys I consulted also had mixed responses, saying it may or may not be an issue, and that many investors do it without problems.

Instead of transferring the properties directly to the LLC, would it make more sense to:
1.  First create a trust (revocable )
2.  Make the LLC the owner of the trust
3. Transfer the properties into the trust, instead of the LLC?

This way, the lender wouldn't be triggered (since most allow transfers to a trust), but I'd still have the benefits of an LLC.

Other options 

a. Should I go ahead with the deed transfer to the Series LLC and deal with lender issues if they arise? one property at a time.
b.  Should I set up a trust first, then move the LLC and properties into it?
c. Should I cancel the LLC entirely and just rely on umbrella insurance?

Curious how other investors are handling this. Would love to hear what’s worked (or not worked) for others. Thanks!

Regards,

Mohit

Thanks for the suggestions. Sounds good. Yes, I did took the security deposit. 

Lease has following clause so no early termination clause.  Also unless there is any specific termination clause, tenant is responsible/liable to pay full lease term.

I think there were specific outlier in Texas that allows tenant to exit without penalty, but it does not qualify for any of them...

2.9.1. Default by Tenant

Tenant will be in default (Default) if: (i) Tenant fails to pay any Monthly Rent by 7 days after Monthly Rent is due and does not cure the failure within 7 days of receiving written notice from Landlord; (ii) Tenant fails to pay any Additional Rent by 7 days after the Additional Rent is due and does not cure the failure within 7 days of receiving written notice from Landlord or; (iii) Tenant fails to comply with any other obligation or restriction in this Lease and does not cure the failure within 7 days of receiving written notice from Landlord. If Tenant Defaults under this Lease, Landlord may exercise all rights and remedies available under applicable law, including the right to: (i) terminate this Lease; (ii) regain possession of the Property through an eviction or similar process; (iii) recover from Tenant all unpaid Rent, including unpaid Monthly Rent, Additional Rent, Late Fees and, if applicable, holdover Rent for the period prior to Tenant’s delivery of possession of the Property to Landlord; (iv) recover all Rent payable under this Lease for the period from the date of termination for Tenant Default through the stated Expiration Date, less the amount Landlord is able to collect from any replacement tenants for that period; and (v) recover all

reasonable costs and expenses incurred by Landlord in repairing any damage to the Property, caused by the improper use

by any Occupant or any guests of an Occupant, less any amounts obtained from the Security Deposit. Additionally, to the

extent permitted under applicable law, Landlord may recover from Tenant Landlord’s court costs and reasonable attorneys’

fees and expenses incurred in connection with any legal proceedings against Tenant.

To the extent required by applicable law, Landlord will use reasonable efforts to mitigate any damages resulting from Tenant

Default.

I have rental property with signed lease (through Zillow) with starting lease date within a week. However the tenant is telling me they have personal issue and wants to move out of the lease or asking me options to break the contract. 

I checked the lease created through Zillow that does not show up any option for reletting but what I am aware (done it few times when one of my other property was managed by a property manager) is tenant could pay reletting fees (typically one month rental) that allows property to be re-listed. Tenant will continue to pay for utilities and any difference (or loss in rental) if home is leased for lower monthly rent than current lease term. 

I called Zillow and they told me they don't handle lease cancellation or changes but suggested to contact local attorney (I am in Texas/Austin). 

a) Take some penality and allow tenant to break the lease. 

b) take re-letting fees, list the house again and current tenant is bound to honor until it gets leased.

For both a) and b) I will still have to contact attorney as Zillow does not let me cancel the lease but only mark the lease cancelled once it is done. 

I would prefer b) for obvious reasons but let me know if there are other options. 

Appreciate any help/advice. 

Thanks,

Mohit