Putting Real Property into LLC

[jaylind_01]

My state is PA. I recently created an LLC and would like to move a rental property I own into the newly formed LLC. What is the process to do so? I also have a mortgage on the property. Will I need to inform the mortgage company of the move out of my name into the LLC? Can the mortgage company object or prevent me from putting the property into the LLC?
Thank you for your advice.

 

[justalayman]

yes, the mortgage lender needs to know. While the lender would not be able to actually prevent you from changing title, this might activate a due on sale clause. If it does, you will need to come up with the cash to pay off the mortgage loan immediately.

 

[FlyingRon]

Justa is right on, but how they are going to react depends pretty much on what you told them when you got the loan. If the loan was from the start known to be for a rental property, they probably won't have any issue having the property deeded into a LLC controlled by the same people. Of course, they're not going to budge on you still being responsible for the mortgage personally.

If this was taken out as a residential mortgage, you're probably already in violation of it if you didn't obtain consent to lease. I'd not call attention to things by changing the name (and they normally will notice the insurance changing if you're paying that directly).

 

[jaylind_01]

Thanks guys. It was known by the mortgage company at the time of purchase that this would be a rental property so that piece is ok. Regarding getting the property out of my name and into the LLC, I see where you've said I need to have it deeded to the LLC. Does this mean that I'd just need to contact a title company to have that done? And, is there anything else that I'd need to do or is that all?

 

[justalayman]

be absolutely sure the lender does not have a problem with this. If you transfer title and your contract allows it, the lender can call the loan due in full. Once you take this action, you cannot undue it so there would be no correcting the problem. Just something to be very sure of before actually making the move.


The lender also might require the LLC to sign a mortgage (not a mortgage loan) so so should there be financial problems, there is less trouble foreclosing on the property.

I would strongly suggest that unless you are very knowledgeable concerning transfers of property, a lawyer be consulted to advise you of any downfalls of such a transfer. There could be tax consequences to both you and the LLC with this transfer as well.

Are you the sole member of the LLC? If not, understand that you, as an individual, will be losing control over the property yet you personally will retain liability for the financial debt of the property. If you are a single member LLC, obviously as the only member, you would fully control the LLC and can control the actions of the LLC as you desire.

 

[jaylind_01]

Thank you. Your advice is very helpful.