Personal Loan--Deed to LLC

I am a new investor and want to put property into an LLC for personal asset protection. My investment profile is to buy and hold single family residential. I have had no success in getting a loan for an LLC, except for an adjustable rate commercial mortgage which I really don’t want. The lenders say that a loan to an LLC is unacceptable because the loan would not be saleable on the secondary market.
I have read other posts that suggest signing for the loan personally and then quit claiming the property to the LLC; my wife and I would be the only members of the LLC.
My question: If I (we) sign personally for the loan and then quit claim to the LLC, what happens when the lender tries to sell the loan and discovers we have quit claimed the property? How frequently do lenders call a loan due in this situation?

Any suggestions or advice on how to avoid triggering a Due On Sale clause would be greatly appreciated–thank you.

Good post. What I’d like to know are the ramifications of calling the lender and asking permission to move the title into an LLC but keeping the DOT/mortgage in my name? Has anyone been successful at doing this? Has this raised suspicion with the lender that later came back to bite you? Other comments?

YOu should realize a mortgage and a deed are two separate instruments. If your name is on the loan or mortgage, the title has nothing to do with the loan. The bank will still come after you to repay the debt.

I am also new to this field and find myself confused with this issue as well.

I am still trying to locate financing for a house my partner and I plan to purchase in several weeks, with the intent of transferring it to our LLC. Like you bgc, getting a loan for the LLC has been difficult and I’ve received many suggestions of obtaining financing through a personal loan, and then transferring the property to the LLC. Regarding your question, I’ve been told to ask the lender upfront about transferring to the LLC, and keep searching until I find one, which I haven’t yet.

But will lenders allow transfer of the deed only, or will they be willing to allow transfer of the deed and mortgage? And if so, depending on the lender, will they require the terms of the loan be modified based on the mortgage being held by the LLC? Does it even matter whose name is on the mortgage when owning an LLC? In other words, is it more important to get the deed in the name of the LLC or both the deed and mortgage when trying to establish one’s LLC for the future?

Still learning. BPP


Getting a loan for an LLC is difficult. You can get one if you personally guarantee it. (I would not recommend this) But it can be done. The bank needs to show their investors that when your LLC goes Bankrupt, they will be repaid. It is just security for the bank.

The Federal Law states that you have the ability to transfer title lawfully if it fits within specific guidlines (Garn St. Jermaine Act).

I have seen people transfer title to an intervivos land trust and sell beneficial interest in the land trust to an LLC or another individual.

If you have questions regarding this, I can help you with it.



Why wouldn’t you recommend personally guaranteeing a loan for the LLC? How else can I get the loan?

Thanks again. BPP

You need to do what is right for you and your specific situation. You could look for a private investor and pay them a little more for the use of their money. Everytime you guarantee a loan, you effect your personal liability and put your personal assets at risk for judgements and collections. I am just giving you a different way to look at your situation.

there are many ways to get the loan. Business lines of credit and private lenders (investors), IRA money, Friends, Family, Refinance currently owned property and use the equity from them, Find a cash Partner and split 50/50 or however you negotiate the terms. There are too many ways to list.

you or anyone reading this can contact me and we can your individual situation and brainstorm some ideas.

866-520-2582 ext. 72311

Thanks again Steve.

A while back, I was told that personally guaranteeing the loan would not defeat the purpose of the LLC and its liability protection. I wasn’t sure of the validity of that statement, and you have just reinforced my suspicions.


An LLC does provide great liability protection (if used properly), but don’t mistake that the mortgage that you personally guarantee will be a part of that Liability protection. If that were the case, then we would all do it and the banks would lose everything when the corporation files bankruptcy.

They are two separate instruments and are used for two separate purposes. Even an LLC can be the inappropriate choice if you don’t use it properly and follow the guidlines to the extent of the Law. You will need a competent attorney or cpa to show you how to use it properly.

you must ask yourself,“what do I want to accomplish” or “what is my exit strategy.” When you have a clear picture of the end result, you should be able chart a path to get there.


I have been lurking on these boards for some time, but this topic cried out for me to register and contribute.
Here is my 2 cents.
I work with many investors on a day to day basis, and this topic has come up repeatedly. While I am no means an expert, here is my opinion.

First of all, I feel an LLC may have asset protection benefits. However, my opinion is, that this protection is often accomplished just as easily with the proper insurance. My experiences have been that investors want to title their properties in an LLC to ‘keep them from losing everything’ in a law suit. If this is the case, do you plan on setting up an LLC for each property? I often find that if you are married, titling the marital assets in both names, and the investment properties in an individuals name, protects the marital assets automatically. If you have say 10 properties and all are in the same LLC, the entire asset base is at risk anyway, and if you title each property in it’s own LLC, you risk having the corporate veil pierced with a lawsuit anyhow. If, instead, you carry excellent insurance ($2,000,000 minimum), you are less likely to have your assets of any kind targeted. Why would they go after one or two hundred thousand in equity, when they can get more, ‘quicker’ from your insurance?

In regards to financing, there certainly are companies available to wholesale mortgage brokers that will lend on a property titled in the name of the LLC. Yes, you read that right, they will not lend to the LLC, but lend to the member(s) of the LLC individually and allow the title to be held in the name of the LLC.(to allow your to ‘protect’ your anonimity at the courthouse)
As in any type of financing, since what you are asking for is a specialized product, it will come with inherent pricing premiums and additional restrictions. For example; a perfect credit borrower looking to buy an investment in their individual name could easily qualify for 100% financing, but if you throw the LLC into the equation, you will probably find your limit closer to 80%.

On the subject of transferring title after the closing…I always advise my customer’s against it, since it absolutely could
trigger the due on sale clause of the mortgage, and I also feel that if I would be being irresponsible to both my customers and lenders by making a recomendation like that.

As with anything, the entire transaction in my mind, comes down to a risk/benefits analysis…By holding in the name of an individual, and carrying awesome insurance, it leaves the playing field of options much more open and available. Especially in the coming days as standards tighten, and rates rise, play the game with the most advantages on your side as possible.

Whew!..Good luck and happy investing!!

Re: due on sale clause -

i believe one can call the lender ask:

If they can make an unassumable mortgage - assumable - thus negating the DOSC. Will they if you plan to transfer or assume mortgage through LLC - probably not, but if seller is late a month or two…and seller has, oh i don’t know, say over 50% equity in home, i guess maybe they’d at least consider it - especially if your LLC has some credit/good financials to fall back on. ?

Maybe ask the lender:
If they are just servicing the loan, and if Freddie Mac owns the loan? Meaning, Freddie Mac has purchased it from original lender - this would negate DOSC, because assumable mortgages are not enforced or recognized by Freddie Mac. So then, transferring deed to LLC, assuming a sellers mortgage, yada yada yada is doable.
I think alot of sellers out there don’t even know who owns their loan, they just know who services the loan - who they write the check to.

Some could say, oh no, the lender will call the loan due, but they can’t - it’s not their loan. Bottom Line - Freddie Mac doesn’t recognize DOSC.

Also, look into Land Trusts - they are exempt from DOSC - but some find this risky and a gamble if lender really pushes and takes you to court to enforce DOSC. The problem for some is that you, the buyer are having a seller create a Trust, with you as the beneficiary WITHOUT notifying the lender, because you dont’ need to by law. Because the seller is not doing anything illegal, in fact it’s very legal. But nevertheless, some look at this and think it is risky…

I think, I THINK, with my limited experience in REI (I’m a newb), purchasing over 2Mil in insurance is expensive? And wouldn’t that just invite law suits? I’m no lawyer, and I could be talking out of my uknowhat.

LLC + land trust is at the very least, worth looking into…I know I am.

Double and Triple check all that I have written… ;D

you make some very valid points. I could not agree more with you about having good insurance for your corporation. This is your red cape in the bull ring. Why would the bull come after you for a couple hundered thousand when he can go after the cape for 2 million. That is definately valid and I also encourage this practice.

Yes, I agree with you again about wholesale mortgage brokers having the ability to lend money to “individual” members of an LLC. But, why would you do that? You are still giving your personal guarantee for the loan.

As for titling the property. I would not recommend titling marital assets in both spouse’s name and separating investments in one spouse or the others name. If your name is linked to any asset … it can be seized. Remember, if a judge can “see” an asset he or she can seize it. By labling your assets with your name on it is like placing a big red target on your back and standing in front of a CANNON. Statistics prove that the average american will be involved in 5 lawsuits in a lifetime. If you own a business, the risk is that you will be named in a lawsuit with a 1 in 3 chance. IF you have investment properties, you are in business according to the IRS. What happens when your insurance policy does not cover the liabilty of the company.

Besides, The federal law alllows an owner of real property to transfer the title if the owner follows the specific guidlines set out by "Federal Depository Institution regulations Act of 1982 (FDIRA - Garn-St Germain Act). It specifically outlines 9 exemptions under which a lender is PROHIBITED from enforcing its DOSC. One of them is transfer to an Inter-Vivos Trust in which the borrower remains “A” Beneficiary of the trust.

Now what you do with the trust is up to you. Sell it to an LLC, or whatever. now your LLC can have the Fee Defeasible rights of ownership under IRC paragraph 163. But seek the advice of a competent tax attorney or cpa. They will guide you properly.


Thanks again for the great info and suggestions Dave, TMCG, and Steve.

I am meeting with my lawyer tomorrow, who also shares an office with an acquaintance who happens to own a mortgage company, so I should be able to have more direction after that.


Wow! Some great discussion and viewpoints here!
I would like to respond to some of the questions broached and continue the discussion.
TMCG- Due on sale clause; There is little doubt that the due on sale clause is murky. I have heard many different points of view on the subject from ‘gurus’ in the industry. Many of them tend to agree that their are enough loopholes that statistically their risk is minimal. I have heard the argument that ‘they can not call the loan unless they can prove that they were significantly adversely affected by the transfer’. I have heard that if they establish a history of taking payments from you, they can not call the loan. I have even heard the strategy of nipping it all in the bud and sending a certified letter to the servicer(your contact) of the loan that you have changed ownership interest. (the argument with this is it will probably never end up on the desk of someone who cares, and you can then certainly say you told them and they did nothing).

All this is fine for a larger investor that can handle the bumps in the road, but could be catastrophic for a ‘newbie’ investor. I make sure to discuss the topic completely with my investor clients so they know the potential pitfalls.

As far as ‘Freddie Mac’ and the due on sale clause. (Again I am speaking from my own limited knowledge) First of all, Freddie Mac establishes guidelines under which certain loans can be approved and while they certainly buy some loans, a large majority of ‘Agency’ loans are packaged and sold to investors on the secondary market…not all to ‘Freddie Mac’ (if my understanding is correct) This means there could be many different decision makers involved. Second, and perhaps more to the point, many investors simply don’t use ‘Agency’ or Freddie Mac financing. Agency loans generally require full documentation of income (often difficult for investors) and as a rule, do not allow more than 10 financed properties in an individuals name to consider them for financing. As a result, many loans go to less convetional or Alt A lenders with different and more flexible criteria (such as allowing title in the LLC, No debt ratio calculations, no limit on properties owned, etc.) These types of lenders are willing to take the risks associated with these “oddball” loans, but have that risk calculated into their pricing.

In regard to insurance…My cost for a $2M umbrella liability policy that covers (now) my primary, my first investment properties, and both my vehicles, costs me approx. $240/year and it will go up by about $15bucks each time I add a property. In my opinion, that is inexpensive piece of mind.

Redwing–Titling to LLC but lending to members…most of my customers have the goal of titling the property in the name of an LLC for “annonimity”. Yes, it provides them asset protection, but most of my guys do it because ‘I don’t want my name all over the county records and if someone wants to sue me, he can find everything I own’. In this case, their goal is accomplished simply by titling in the LLC and then having the ability to finance through typical residential lenders instead of using a commercial lender.(which is where you would need to get the money if you were using the LLC alone with non-recourse financing, since no residential lender that I know of will lend non recourse money to a business entity)

As far as titling of the properties, I may be jaded by the community property laws in PA. In this state, if I own and investment property as an individual, but my primary residence is in both my name and my spouse’s name, it is therefore community property and not attacheable(?) for and individual’s debt or obligation. (again to my understanding)

The last paragraphs of your reply sounded both knowledgable and confusing as !@##$. That sounds like some interesting and well informed information, but again I go back to ‘my little corner of the world’ where investors usually own less than 50 properties, and I think in that situation, an awesome insurance policy is your best defense(and probably a lot cheaper than attornies fees for all that other mumbo jumbo)

BPP- Thanks for sparking this lively discussion, and I will be interested to hear what the proffessionals you are dealing with advise you. Please keep us in the loop, and remember one of the key ways to be succesful in this business is to have your “power team” of experts in place…make sure you are comfortable with and trust those working with you, and allow them to work hard for you.

Just an update after meeting with my lawyer and mortgage company.

They both agreed that the LLC does have benefits, obviously, but suggested an umbrella insurance policy (like $2M as has been discussed in this thread). They’re opinion was that the benefits of operating under an LLC are outweighed by the “hassles” associated with doing so, when coupled with the relatively inexpensive protection proper insurance provides. They actually suggested that we dissolve the LLC at the end of one year (because it won’t cost anything to keep it for that time), stay on top of our financials, and that should satisfy our needs (based on us flipping 3 properties or so a year for the time being).

Given all that, we were able to discuss 0% down financing options, via a residential loan, based on our credit, assets, and cash on hand. So we plan on going forward with that and possibly titling the property to the LLC, while using credit cards to pay for most of our rehab costs. And if all goes as planned, or close to as planned at least, our profits and improved credit/experience will help us greatly on our next property.

That’s the gist and I thank you all for your input, suggestions, and shared knowledge. We plan on closing at the end of the month and should come out pretty good in the end. I’ll definitely continue to scour these forums for helpful info along the way.


They both agreed that the LLC does have benefits, obviously, but suggested an umbrella insurance policy (like $2M as has been discussed in this thread). They’re opinion was that the benefits of operating under an LLC are outweighed by the “hassles” associated with doing so, when coupled with the relatively inexpensive protection proper insurance provides. They actually suggested that we dissolve the LLC at the end of one year (because it won’t cost anything to keep it for that time), stay on top of our financials, and that should satisfy our needs (based on us flipping 3 properties or so a year for the time being).

Well I went to a biz seminar tonight and spoke to a few people and they said that 2M or 10M in insurance may not be enough. Because nothing is ever enough and it is all heresay on who, when, and for how much you’ll be sued for and for what reasons. Secondly, I went to get general contractor’s/commercial insurance and so far, for REI, it’s a no go - meaning I have not found an insurance agent, willing to cover a LLC. Also, if you cover yourself in an umbrella policy, how much is enough to protect your personal assets? And doesn’t that completely defeat the purpose of running a business like this?

Furthermore, what state do you live in? I have not heard that if you have a LLC for just over one year, it doesn’t “cost anything”. What do you mean by that? Do you get refunded your filing fees with the state? Is this what this means? Or are you referring to the 5K write off in taxes for starting up a business?

What do you mean by this?

Lastly, flipping with an LLC seems like a waste of time. Just get a DBA for 50 bucks, get the insurance, buy fix and sell your purchases. Have you considered the cap gains taxes on flipping houses?

TMCG- there are plenty of insurance companies that will write insurance that covers LLC’s … Renovators insurance(By the Wrenn Agency) is one, and I have two local companies here in PA that do the same.
“Also, if you cover yourself in an umbrella policy, how much is enough to protect your personal assets?” – Yes, with having insurance, there is still a chance of your personal assets being at risk, but there are a few things to consider with this. First of all, the main reason you will probably get sued for big $ (over your 2M or so in coverage) would be negligence. While it is obviously more complicated than just this ‘don’t be negligent’.

In regards to protecting yourself, redwing made an excellent analogy above “This is your red cape in the bull ring. Why would the bull come after you for a couple hundered thousand when he can go after the cape for 2 million.” In other words, if someone is suing you, are they more likely to take a quick insurance settlement for up to the 2M limit or fight for what could be years in court (having no money in the mean time) for the potential to get 2M in insurance and another one or two hundred thousand from additional personal assets?

Your last comment is also a frequent discussion I have with my investor clients. " Have you considered the cap gains taxes on flipping houses?" This is also something to be careful with, because if you reach the level where this can be construed as your primary source of income, you could be paying taxes on this income as ordinary income (subject to social security taxes, et al) instead of paying capital gains tax.

I am not trying to be a wet blanket for anyone involved, just make sure you go in with your eyes open.

Happy Investing!!

TMCG, I meant that our fees are paid and we owe nothing more to retain the LLC for the rest of the year.

And I guess my post didn’t reflect what I have been slowly learning over the past few weeks, which is also what you eluded to. My partner and I may have been a bit hasty in forming the LLC, and it may be unnecessary in order for us to flip houses in the manner we would like to. We are still learning and if that’s the biggest “mistake” we make, then I’ll be happy with that. It’s just that we’ve read many opinions on using an LLC, none of which fully discouraged the use of one, and I haven’t heard the suggestion of using an umbrella policy until recently.

And I have an accountant who I’m meeting with shortly to talk about all pertinent tax issues.

Thanks again for your input.