Former CPA & Writer SimplifyLLC
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LLC Operation Agreement

How to Transfer Real Estate to an LLC

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Given all the advantages of owning real estate as an LLC, it's no suprise that a client might come to you for advice. Here, Melissa Pedigo runs through what your client will need to do to transfer real estate to an LLC, from forming and registering the LLC to opening business accounts to keep personal expenses separate. Follow these easy steps, and your client will have an LLC in no time.

Sep 27th 2021
Former CPA & Writer SimplifyLLC
Columnist
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Most people buy property in their name because it’s easy. However, listing property under an individual’s name can create problems down the road, like liabilities for any troublesome incidents. So, it’s understandable why your client might come to you wanting to transfer their real estate to a limited liability company (LLC). 

But what’s involved in transferring property from an individual to an LLC? There are a few relatively easy steps to take, and we’ll walk you through each of them. 

Contact the Bank or Lender

Transferring the real estate title to an LLC doesn’t transfer the mortgage, so your client must contact their bank or lender if the property still has a loan. Lenders typically handle these situations in three ways:

  • They allow the transfer to an LLC as long as your client personally remains liable on the mortgage. Your client must continue to make timely mortgage payments and be responsible for any late fees.
  • They could require the LLC to refinance the mortgage in its name. But unless the LLC has an established credit history and income, your client will likely have to sign a personal guarantee to make payments if the LLC fails to do so.
  • If the lender has a “due on sale” clause, which means the mortgage must be paid off when the property is sold or transferred, they can enforce this clause and require your client to find a new mortgage.

Form the LLC

If your client doesn’t already have an LLC, they should take the following steps to form one. 

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Replies (2)

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By Michael P Kelly
Sep 29th 2021 16:33

This is a very good and simplified article, which I will use when my clients ask this question. Saves me having to write a response. Thank you.

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By Ted Leibowitz
Sep 29th 2021 20:22

This article is very useful/valuable with the SALT limitation and States now allowing a work around by taxing Passthroughs and allowing credits on taxpayers personal tax returns.
However not Single Member LLCs filed as Schedule Cs, at least in NY. Not sure how other States handle this. Can always take on a "trusted" 1% partner.

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