I have formed an LLC entity to protect real estate investment, however, based on the fact that my conventional lender will not loan to an LLC, I plan to maintain my rental property in my name for at least a year as I cannot afford the repercussions if the lender invokes the due on sale clause, should I transfer the title to the LLC.
Is there any benefit or reason to continue to operate through my LLC entity if my property will be in my personal name? Should I just forget about the LLC until I can deed the property into the LLC?
I believe you should do business as a LLC entity, C or S Corp. You would want to check with a good estate planning R/E attorney or CPA on the legal ramifications especially when you are dealing with multiple properties that require asset protection since these are just suggestions and I am not allowed to give legal advice since Iam not an attorney.
The thing to understand is your real estate property is not protected by the LLC only you or the officers in your LLC are protected.
What you would want to do is vest the property’s title into a title holding Illinois type trust and then make your LLC a beneficiary of the trust and this if done correctly should provide you with bulletproof protection for your LLC and property since using the land trust vehicle is legal under federal regarding the Garn St Germian Act of 1982.
It like the 2 way rule if there is a charging order or civil litigation againest the property the property is protected by way of the trustee in the land trust and the flip side is in the LLC or corporate entity the officers doing business are protected so it is like you put up 2 different roadblocks to stop or slowdown litigation or any other legal action.
Lenders give loans to individuals not coporations as you mentioned in your post since even if they accepted your loan applicaion as a corp you would still be personally repsonsible for the debt the only thing is will need corporate credit to secure a loan but like I said I believe you still have to cosign for the loan but check with a professional on that.
As far as a benefit to your LLC yes I would utilize that entity to do business.
Thanks for your advice. I appreciate your time and expertise! I certainly would like to utilize the LLC that I have formed for renting and managing the property.
Regarding your comment…
Ultimately I would like to transfer the title of my one rental house to my LLC but as I mentioned I currently cannot afford to lose the terms of my current financing and do not have the means to buy the home free and clear if my lender enforced a due on sale.
So if my property is owned by me personally but operated by my LLC, should my LLC be paid and taxed for the rental income and expenses?
Referring to your question I believe that is the case but I can not give out tax advice so be sure to check with a competent tax attorney or CPA on that issue.
You will have more tax benefits operating as an LLC as opposed to just being an individual.
When you transfer title from you to your LLC that can invoke the lender due on sale so there is a concern since the lender will say we did not lend our money to the LLC. Lenders lend to individuals not companies unless a officer in the corp personally guarantees the loan.
The due on sale trigger It does not happen all too often but can happen nonetheless.
You can use a land trust to get around a due on sale since you are following federal law and thus are also protecting the property for any type of legal action such as liens, judgements, bankruptcies etc.
Good luck in your entitly structuring…