Well, I sent the letter concerning transferring the properties to an LLC, and received the following reply:
“Pleased be informed that Countrywide does not allow transfer of title to LLC’s.”
Any suggestions?
P.S. Any idea why such resistance? Don’t lenders realize that my assets are their protection? If my assets can be protected from exposure to lawsuits through use of an LLC, that simply strenthens their collateral. ???
Does anybody know if Bank of America allows for deeding over to LLC’s or do they have the same attitude as Countrywide?
Milton
DO A LAND TRUST! YOU CAN MAKE THE BENEFICIARY YOUR LLC
I’m not sure that this protects one from liability since the Land Trust is revocable, and the assignment of beneficiary can be changed at will. If title is not transferred to the LLC, I believe the title still belongs to the Trust, and I believe the Trust is simply considered an extension of my person. As far as I can tell, that still leaves me stuck with the liability - in other words I would receive no benefit from the LLC being the beneficiary. I’m no attorney, so I may be wrong on this, but that’s how I read it.
Hi,
I’m new to real estate investing and have recently formed an LLC with 2 other members. Like some other postings, I am also trying to transfer a property into a newly formed LLC. I’m wondering is anyone can give me some advice on several questions I have.
Can I use a Quitclaim Deed to transfer a property? Or, should I use a warranty deed? What is the main difference?
What consideration amount should I put in the Deed for the transfer? What are the tax implications?
Thanks for you help.
Kster,
I can only speak for what you should do in Texas.
Use a Special Warranty Deed to convey the property into the LLC. In the future, a title company may not like the Quitclaim Deed in the chain of title. A Quitclaim Deed conveys whatever interest you have in the property, if any. A Special Warranty Deed contains a warranty by the Grantor (Seller) that the buyer is getting good title free from any claims “by, through or under” the Grantor. The General Warranty Deed contains a warranty against claims made by anyone, whether or not the claims are made through the Seller or not. As a Buyer, you want a General Warranty Deed instead of a Special Warranty Deed.
For consideration, you can just say "for $10.00 and other good and valuable consideration. Speak to your CPA about how to allocate the capital contribution among the members of the LLC.
Good Luck.
Charles,
Thanks for the quick response and the advise. I really appreciate it!
K
I have been folloiwng the posts and they are all very helpful. I have bought a duplex and plan on doing excatly what has been posted - i.e. forming an LLC and granting deed to the LLC for the real estate. But it leaves me with the question on how to sell the property later.
Once I have deeded the property to ‘my’ LLC, a couple (or more) of years later, how do I sell the property?
The deed will be in the name of the LLC and the mortgage is in my personal name. Will there be any problem later with selling the property?
You should not have any problem. The LLC deeds the property to the buyer. The buyer’s funds are used to pay off the loan that is in your name.
So far I have not read a single followup post to what I would consider one of the most important topics related to owning investment real estate in an LLC for liability reassons - and that topic is refinancing a mortgage or placing a first mortgage on a free-and-clear owned property. What will you plan to do down the road after you have transfered a property you intend to hold into an LLC and eventually want to refi for a cash-out? I hope your answer is not that you will simply transfer the title back into your name. In the state of Maryland you can transfer a property into an LLC without any transfer tax consequence BUT transgerring a property out of an LLC results in a transfer tax at the FULL APPARISED VALUE IF THE PROPERTY. And the city and state transfer tax for Baltimore, MD is a combined 3%!
I know taxes vary by state to state, and perhaps others do not have as big a problem in this area as the state of Maryland where I live. I am grappling with this very problem right now as I’m trying to put a mortgage on a property that I purchased all cash and left in the LLC giving me the instant liability protection that has been thoroughly discussed here as well as avoiding the transfer tax at closing since I bought the LLC and the property ownership did not change. After trying to find a lender with good terms whiole trying to keep the property in the LLC, I am reconsidering keeping the property titled in the LLC due to thge extremely poor terms and conditions I am receiving from the few lenders who will even offer any financing solutions with the property titled in the LLC.
I’d be very interested in hearing what people are finding when trying to refi or get a 1st mortgage on a property already titled in an LLC. If anyone knows any lenders who have good terms for such mortgages, I’d love to hear about it. So far the only lender I have found who will underwrite such a loan is offering me an ARM only while I want a 30-year fixed, high points, high rate, 70% cash-out (deal breaker for me as I need 80%), etc.
Any others who have been down this road have anything to share?
Glenn
If your building residential real estate, when would you want to transfer the property to the LLC? Currently, the loans are in the individuals name and once construction was completed would be transfered to the LLC. But, I don’t want them to get hit with a gain years down the road due to the difference in value at time of transfer. Would this be an issue? I believe with our construction loan there are actually two different escrows 1) for the construction portion and 2) once construction is completed into the final loan. If we transfered title before #2 they would catch what we have done??? Any info is appreciated. Thanks in advance
so…what is the real answer?? i am also trying to complete the same transaction but my mortgage company will not write a mortgage to an LLC. Would an umbrella insurance policy work best in this case?
looking forward to your replies - richd
Anyone know how Chase and Bank Of America handle or act or react on propety transfer to my LLC? This thread is some old but very helpful information so I wanted to revive and see what other people are doing at the present time and compare their experiences to these folks have experience or done in 2005.
Thanks,
DFW
There are lenders that will loan to directly to an LLC. If you plan to purchase using an entity, then buy in the name of the entity.
The big problem which has not been addressed in this thread is that transfers to an LLC with the intent of making it more difficult for creditors to collect is illegal and courts undo such transactions. Another missing discussion is that an LLC does not protect personal assets if the individual’s own personal actions caused the injury. The individual is sued personally for his personal actions and any judgment is paid with personal assets. The LLC is also responsible if the individual was acting on behalf of it.