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    7 Replies Latest reply on Feb 20, 2012 2:20 PM by johnmdf1492

    How can I transfer my mortgages to my LLC?

    Tumblinablue Newbie
      I am a new real estate investor and I currently own 2 homes that generate a nice monthly cash flow of about $800/month. The problem is that the titles and mortgages are in my personal name and I want to get them transfered to my LLC. I've contacted the lenders that I have my mortgages through and they said that I have to refinance under the LLC in order to get the titles/mortgages transfered. I just formed the LLC and I don't even have my Tax ID number yet (I'll have it next week). Does anyone know how to secure financing for this purpose? I would like to use 30 yr fixed mortgages but I can't seem to find any banks that have those lending terms for businesses. Please help!
        • Re: How can I transfer my mortgages to my LLC?
          LUCKIEST Guide
          How can I transfer my mortgages to my LLC.
          Anybody involved in Real Estate should have an Accountant and a Lawyer.
          **I do not understand your statement that you " just formed the LLC and I
          don't even have my Tax ID number yet (I'll have it next week)".
          It sounds like you are mixing up the facts.
          *Ask your Lawyer, LUCKIEST*<br /
            • Re: How can I transfer my mortgages to my LLC?
              v-guru Newbie
              Maybe Tumblina means the LLC is registered with the state and the Fed ID is forthcoming. To my knowledge that is the right order of things.

              The Fed ID can be gotten immediately...so, I am not sure what the holdup is - maybe that's what you mean Luckiest?
              • Re: How can I transfer my mortgages to my LLC?
                Tumblinablue Newbie
                I do have an accountant and a lawyer. My lawyer filed the registration papers for the LLC on Friday afternoon. Both the accountant and the lawyer told me I have to refinance to transfer the properties into the LLC.
                  • Re: How can I transfer my mortgages to my LLC?
                    dublincpa Scout
                    Disclaimer: I am not, never have been nor likely ever will be an attorney in any state. This isn't legal advice, just tidbits picked up here and there.

                    How favorable are the terms under which you would refi in the LLC relative to the current terms? Will you have a need to refi soon anyway as a result of an ARM or balloon?

                    You will still have a personal guarantee on the mortgage in the LLC or get much less favorable terms. See if the lender has a problem with you quit claiming the property to the LLC without modification to the mortgage. In IL, most mortgages are focused on beneficial interest. => You are on the hook for the mortgage. As long as you own 100% of the LLC, lenders here tend not to care so much.

                    Did you buy as owner occupied? That may make a difference to the lender. They would want to make you refi to higher non owner occupied rates.

                    I would think that for these houses, good liability and umbrella policies cover you and the LLC would get you most of the way there. I am usually not one to advocate saving on legal processes but if there isn't a real or urgent need and you can sufficiently hedge the risk, it may be worth considering.

                    One trick flippers use when the take a house subject to a mortgage and want to avoid a due on sale acceleration clause is to set up a land trust with you as beneficiary (not sure if TX or CA have or what the equivalents are), quit claim deed the property to the trust then switch the beneficiary to the LLC. This avoids tipping the lender off when the annual proof of insurance is sent. They are looking for the land trust and see it. No questions raised. Again, not advocating this. Just sharing what I have picked up.

                    Good luck.
                      • Re: How can I transfer my mortgages to my LLC?
                        Tumblinablue Newbie
                        I purchased the properties as an "investor" so I have much higher interest rates than "owner occupied." My interest rate is 6.625% 30 yr fixed for both properties. I know that I can't transfer title on one of the houses because there is a clause in my loan docs that states that a transfer in title is viewed as a sale (even if I am the sole owner of the LLC) and the full mortgage would be due upon transfer or the property will go into foreclosure.

                        Both of the houses are brand new houses with 10 yr builder waranty and I have about $500,000 in liability coverage in addition to Home owners insurance for both properties.
                  • Re: How can I transfer my mortgages to my LLC?
                    Lighthouse24 Ranger

                    Your LLC is a separate legal entity from you personally, so if the LLC needs traditional mortgage-type financing to buy the property, then it's the same as if you were selling the property to a stranger (in other words, what you're being told is correct).

                    If there's any way you could temporarily pull together enough cash to pay off the mortgages, however, perhaps you could do that and get clear titles -- then immediately sell the property to your LLC. The LLC could then apply for a business loan (instead of a mortgage) using the income producing property it now owns outright as security (the LLC would need to pay for property appraisals, but not the other closing costs that would normally accompany a mortgage loan -- and a ten or fifteen year business loan would probably be an better overall deal than a mortgage anyway). When the bank funded the loan, the LLC would pay you (so you could put your personal finances back in order), and then the LLC would make the monthly loan payments from the rental proceeds. There may be some implications I haven't thought of with this, but at least it might be an option to explore if you're in the position to do so.

                    Hope this helps. Best wishes.
                    • Re: How can I transfer my mortgages to my LLC?
                      johnmdf1492 Wayfarer

                      I found what appears to me to be a good asnwer on this page: http://thellcexpert.com/llcanswers/real-estate-llc/

                       

                      "

                      If you own real estate in your own name and want to transfer it to a real estate LLC in order to benefit from the limited liability protection afforded by a limited liability company, you will need to transfer the property in accordance with the real estate laws in your state.

                      This is usually done with a deed.  The most common way to do this when you are both the owner of the property and the owner of the real estate LLC is to use what is known as a quitclaim deed.  A quitclaim deed basically states that you are transferring whatever ownership interests you have in the property to the LLC.

                      The form of the deed will need to contain specific language that can vary based on your state.  Accordingly, you can seek the help of a local real estate attorney or find a state specific form to use if you do it yourself.  If you cannot find a form, then go to your local county and search the records for actual quitclaim deeds that were filed there.  You should be able to to find several basic forms used.

                      When you transfer the property to your real estate limited liability company, there may be some fees charged by your locality so call your county for specific fee details.

                      Your LLC should execute a resolution or consent agreeing to take on ownership of the property.

                      Finally, one issue that is common in this area is whether there re any issues if the property is subject to a mortgage.  If you are a borrower on a mortgage/deed of trust with a bank for the property, you need ro read your loan documents to see what conditions, limitations or restrictions they may have on the ability to transfer the property to an LLC without paying the loan off.  There is often a clause called a Due on Sale Clause which you should be aware of.If you own 100% of the LLC, there may be ways around this so check with your local real estate attorney for advice."