LLC for rental property
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Anonymous
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We have 1 rental property. I want to know whether it's worth to create an LLC to manage that 1 property. Or create an LLC to hold that property as well as another business I'm hoping to start. Thanks in advance for your feedback.
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Anonymous
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Potentially, if you want to limit your legal exposure and protect other assets (example: your personal home).
That said, there can be a number of downsides. If you have a mortgage on the rental, the bank can call your loan if you're transferring the deed as the LLC is less secure from their perspective (i.e., the LLC has no assets to sue against). You no longer can take the mortgage interest deduction, if it's a multi-interest LLC. |
Anonymous
| Just get an umbrella liability policy for $1M at least. |
Anonymous
| as a previous poster mentioned, a key issue is whether you have a mortgage on the property. I suspect your lender will not allow transfer to an a LLC. If you do have a mortgage, you could find out whether the lender will allow the transfer by contacting the loan officer. |
Anonymous
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You can do this, OP - I have seen it in McLean. Those old houses without renovations are mostly rentals under an LLC - which people list as (example: 1234 King Street LLC) - with each property having the LLC in its name (so they can keep the names straight, while still maintaining their LLC - i.e.: which LLC goes to which address).
That, and they mostly rent to embassies, with the Norwegian embassy begin a favorite - "easier" for the landlord this way (some of the landlords are local, but some are overseas). GL! |
Anonymous
| I believe that if you are in DC, LLCs are automatically subject to rent control. As an individual landlord, you are exempt from rent control if you have less then 4 units. |
Anonymous
| I just called my lender and they will not allow our mortgage to be transferred to the LLC. It is US Bank and it is a company policy. We want to turn our existing property into a rental and now is a good time to refinance. If anyone knows any banks where an LLC ownership is allowed please let me know. |
Anonymous
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I don't think it's just a matter of finding a different bank.
You need a loan that allows LLC ownership, and Fannie Mae conforming loans (the kind that most of us have) do not. The Fannie Mae conforming loans are much cheaper, which is why some previous posters have recommended that you get an umbrella insurance policy instead. It's still possible to do what you want, but it may not be worth it. |
Anonymous
| What advantage do you expect from an LLC? If you are worried about the liability, then just get an umbrella policy. |
Anonymous
| The LLCs that I know absolutely have mortgage loans, OP. Keep shopping. |
Anonymous
| If a landlord uses LLCs for their properties, can't the corporate veil still be pierced? Isn't an umbrella policy (with up to $1M coverage) for each property easiest and best? |
Anonymous
Absolutely. It is false security for the landlord. |
Anonymous
Most lenders will not allow a loan to be transferred at all. You have to pay off the loan and get another loan. Any transfer of the property (whether into LLC or not) will also require the original loan to be paid off. The only issue with the new loan is whether the LLC has sufficient assets (or a guarantor with sufficient assets) to qualify for the loan. |
Anonymous
Unless you bought the property two months ago, now is a terrible time to refinance. Please don’t do it just for this reason. It also makes title and homeowners insurance harder as well. - Landlord |
Anonymous
I hope they did refinance. That post was from 2016. |