• July 2019
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What are the Benefits of an LLC Real Estate Ownership Structure?

The question is a tough one. Do you, or one of your LLC partners, already own the rental property? Or, are you looking to purchase through the LLC? It is fully understandable that you want to use an LLC since you are able to pay your property taxes and even some other home ownership costs through the LLC tax structure. However, it can also be tricky.

 

If you are looking to purchase the rental property through the LLC and the bank will not allow this, it’s likely an issue of capital or collateral. If your LLC is newer or maybe under-funded, this would make sense. In this instance, it is likely you will need to purchase the property individually and then “donate” it to the LLC.  

 

One concern, is whether or not the property is subject to a mortgage. Most mortgages have an “alienation” or “due upon sale” clause. This clause is triggered whenever the property is “disposed of” meaning there is a change in ownership. When you transfer the property from you as an individual into an LLC, this can trigger that clause and the lender may require the full balance of the mortgage to paid.

 

If your LLC can afford this strategy, it’s likely going to be your best bet to get the liability protection associated with an LLC.

 

Since the rules regarding LLC’s and property transfers differ state to state it is best to discuss the particulars of your situation with a seasoned real estate attorney. If you’re struggling to find the right person, reach out to LawTrades for assistance in finding the perfect attorney.