Transferring property to an LLC
I am in the process of purchasing two condos. I formed an LLC to handle the condos as rental units. The mortgage company told me that they would not give a mortgage to an LLC and that they would not go through the closing if the title was in the name of the LLC. The lady at the mortgage company told me I should just close on the properties and then transfer them to the LLC. I would like to avoid paying a lot of extra fees. The lady at the title company told me that I would have to pay doc stamps again if I transfer the title to the LLC. This doesn't seem right to me. I don't understand why I should have to pay double doc stamps of about $700 per $100,000 of property value. Can I just write up a quick claim deed transferring the property from my name to the LLC for minimal consideration (70 cents) and take it to the court house and pay a few dollars to file it?
I will be in a better position to answer this for you after next monday. I am closing on a condo and am scheduled to put it in a Land Trust. If I do it the way I want, I will close the property into the land trust with my LLC as the beneficiary.
If things don't go according to plan A, my attorney says we can close "normally" then transfer the property into the land trust right away.
Will post results here shortly.
Ho...
Man, you guys need to get outta my head 'cuz I was just about to post an identical topic!
I like the idea of signing the paperwork yourself and then transferring the property to the LLC via a quit claim deed. PLEASE let us know what you find out!
On that note, if you own income property free and clear, but your credit ain't the greatest (FICO of 638), how can you go about a 90% refinance? Can I expect some major resistance on this? Special note: I just obtained this property 2 months ago. It does have more than enough positive cash flow to cover a mortgage for 90% LTV. Rent on the unit is $550 and it would still cash flow $125/mo. with a mortgage. Any advice on how to proceed with this?
[addsig]
Check with our County Recorders Office/Register of Deeds. They can tell you what exemptions there are. Most states have exemptions to these taxes/fees if you are transfering from yourself individualy to another entity that you are involved with. Like I said, MOST STATES, but not all. I know for fact this is true in Nebraska and Arizona.
[quote]
On 2003-03-26 21:26, HoGiHung wrote:
I will be in a better position to answer this for you after next monday. I am closing on a condo and am scheduled to put it in a Land Trust. If I do it the way I want, I will close the property into the land trust with my LLC as the beneficiary.
I would recommend you do it the other way; i.e., deed the real estate in the LLC's name and then, if you are so inclined, have the trust own the LLC interests. That way is better for asset protection purposes.
If things don't go according to plan A, my attorney says we can close "normally" then transfer the property into the land trust right away.
See my other post about the DOT/DOS problem with such a suggestion.
KEA:
Check with your title company and see if your title insurance policy will still cover the LLC when you Quitclaim the property to the LLC. In some states it won't. (so you will have wasted your money on an owner's title insurance policy ... lender's title insurance will still cover the lender though).
Taxjunkie
If you quick claim deed the property to a single member LLC are you in violation of the Due on Sale/ Due on Transfer clause in the mortgage?
If you transfer it to a trust instead, can you make the LLC the trustee and the benefical interest? Or must the beneficial interest remain with you in order not to violate the Due on Sale/ Due on Transfer clause?
If the beneficial interest remains with you than will the LLC provide asset protection if it is only the trustee?
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[If you quick claim deed the property to a single member LLC are you in violation of the Due on Sale/ Due on Transfer clause in the mortgage?]
Yes. Read your mortgage agreement. Most say any transfer. Deeding the property to a single member LLC is still a transfer. Also that transfer will not be exempted by the Garn-St. Germain Act as some trusts are.
[If you transfer it to a trust instead, can you make the LLC the trustee and the benefical interest? Or must the beneficial interest remain with you in order not to violate the Due on Sale/ Due on Transfer clause?]
Technically, if the transfer to the trust satisfies the Garn-St. Germain Act, the lender cannot accelerate the mortgage for a violation of the DOS/DOT clause even though the mortgage by its terms says you cannot transfer the property without the lender's approval. However, technically, the transfer of the beneficial interests in the trust to the LLC will not satisfy the Act, so the lender could call the DOS/DOT, but it will be difficult for them to find out since there is no public filng or disclosure that the LLC owns the assets in the trust.
However, before doing that, check with your attorney and CPA, as there can be some adverse tax consequences for your estate planning if that is an issue to you.
Hope that helps,
Taxjunkie