transfer properties to LLC

[andviv]

If I have SFHs that I already bought under my name but now I finally decided to follow the advice of the experts and move them under a LLC, what are the steps to follow?

I remember we discussed this topic or something very similar before, but didn't find the thread.

 

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[bflbob]

Record a Quitclaim Deed transferring title to your LLC.

 

[Diane Kennedy]

Record a Quitclaim Deed transferring title to your LLC.

Sorry BFLBob, I don't agree with this advice. Quitclaim deeds void Title Insurance. Depending on the state you're in, you'll want to use a Warranty Deed or other form of transfer.

Bigger question is how the mortgage company handles the due on sale clause.

I get this question ALL the time and actually have a blog entry going up 1/24 on the steps for that, if you want to check it out at Taxloopholes.com.

 

[EasyMoney_in_NC]

+1 what she said ^^^^

And not sure where you are, but the more I look into this the more I find corporate structure may not necessarily be the way to go. Where I am, if married and properties owned as H/W, real property cannot be attached unless by a dual creditor (against both H/W). If you have many properties and set them up under LLC's you'll have separate yearly filing fees, extra tax prep, accounting etc. I personally decided to "just" insure the properties for what I thought I could rebuild them for, then with that savings I up'd the liability and then put a multi million dollar umbrella policy over everything (including my cars). A lawsuit will come after either you personally or what you own (your part of corporate structures), so if your wife is "clean" (little to no liability exposer in her daily life) why go thru all the extra steps?
I know there are big proponents for LLC's here but I'm just not convinced their worth their weight in gold as some would suggest.

just my .00002 cents (adjusted for inflation)

 

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[bflbob]

Sorry BFLBob, I don't agree with this advice. Quitclaim deeds void Title Insurance. Depending on the state you're in, you'll want to use a Warranty Deed or other form of transfer.

Really?

I asked my RE attorney about that a couple years ago.
I'll have to admit that I don't know about other states.

In our part of NY, most of the houses are 100+ years old.
My attorney said there is virtually no difference between Quitclaim and Warranty Deed, other than responsibility.

When I've looked up deeds online, probably 50%+ are Quitclaims here.

As for the due-on-sale implications, I'll agree there is some risk.
But that would come no matter what form of Deed transfer you use.

I guess I didn't think about other parts of the country having different rules.
Sorry for the confusion.

 

[andviv]

The properties are in Florida (have I mentioned what a great rental market is these days?) and I am a Virginia resident.

Diane, I read the blog post. Any more comments, especially about the insurance?

 

[triple J]

Andviv,

I've been going through this same process and here's where I am so far:

1. I live in NY and my attorney says QC is the best way to transfer b/c something to do with no title insurance (I did bring up the warranty deed thing Diane mentioned to him).

2. He doesn't think it's necessary to notify the banks. He thinks that they'll be fine as long as their still getting paid. If they have a problem, try to work it out and if it can't be worked out, QC the properties back. Not sure if this is the greatest advice.

3. NY has WAAAY high recording fees (+/- $200 for each) so he says he can put each property on one deed and thus only 1 recording fee (which saves me few grand! Rep speed for attorney).

4. Spoke w/my insurance guy. Policies/pricing won't change much. Good news! But I ran into a bit of a delima. Do I need an umbrella policy over my LLCs? He thinks so. This might seem like a silly question, but if I move all assets into an LLC and I'm sued for more than my $1mill coverage, leins could be attached to all my properties. I suppose the answer to have no equity to avoid a lawsuit. If I decide to do an umbrella, I will probably have to go with a different carrier b/c my current insurer does not fall into the minimum size/class classification required by the umbrella policy. So now we're talking more $$$.

I was also thinking of creating a couple of more LLC's (NY does not have a series LLC) to break up the risk of having all properties in one LLC. I would keep the $1mill insurance coverage. However, does this mean I will need a couple of more bank accounts and keeping everything seperate for each LLC?

Still putting the pieces together myself.

 

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[PEERless]

Pardon the noob, but is there any benefit to transferring my one and only property (not my residence) to my LLC? Does cash-flow have any effect on this answer?

 

[Adam]

Pardon the noob, but is there any benefit to transferring my one and only property (not my residence) to my LLC? Does cash-flow have any effect on this answer?

Liability is the primary reason that people transfer deed to an LLC. Most (if not all) attorneys will advise you to use single purpose LLC's for real estate. This means that the LLC or "company" only exists for the sole purpose of holding/owning the underlying real estate. You would not want your operating entity to own real estate for liability reasons.

Last, keep in mind that creating LLC's and deed transfer advise should be the job of your attorney. Don't follow what we say here. Legal advise is worth what you pay for it, and here on the internet, its nothing!

I definitely like to avoid attorneys, but I will say, the thousands and thousands that I have paid mine have kept me out of A LOT of trouble.

 

[CactusWren]

We did that a few years back. Did not know not to use the quit claim. Then had to QC back to our name to get a loan. LOL

I think its very important to have different accounts for each property regardless of how you hold the title. It makes life way better at tax time.

 

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[Bilgefisher]

Andviv, thanks for bringing this topic up awhile back. I'm looking at doing this very shortly. I'm glad DK mentioned the warranty deed.

Also, my lawyer recommended the umbrella policy for me as well today. $300-400/yr for 3m-5m coverage. He mentioned that the nice part about these policies are the lawyer fees are covered in this.