quitclaim/entity mortgage?

[Debbie]

Hi guys,

Got a few questions:
We have two side by side duplexes (4 units) that were purchased in our names less than two years ago. It's doing well. But, we wished we hadn't put our names on the mortgage......So.....can this be done?
1) Come up with LLC and/or Trust Land name.
2) Find a mortgage/broker/whatever
3) Quitclaim the 4 units.
4) Purchase same 4 units in entity name on the mortgage.
5) Pay off the original mortgage that's in our names(to end the paper trail).
6) Pose ourselves as managers, not owners?

Please advise. We could use some hand-holding process.
Thanx. Debbie & Jeff

[BCC]

You can move the properties from your name into a land trust or LLC anytime you want with the help of an attorney. Moving the properties will likely violate the due on sale technically so weigh your tolerance for that risk. Sounds like you are prepared to pay off the mortgage so that may not be a risk for you and I wouldn't actually pay it off until it was necessary.

You will always be in the chain of title but once its moved to an entity it will become less of a factor as time goes by. When and if you get ready to refinance your lender will insist that it be moved back into your name beforehand.

I recommend posing as the property manager instead of the owner. Fewer headaches that way.

Bernard

[Jim Johnson]

Of note- almost all company's will allow you to deed the property to a trust for estate planning purposes without violating the due on sale clause. I have been asked to submit the first page of the trust to the mortgage company and a copy of the trustee papers. Once that is done I have never had a problem dealing with the lenders.

You can move the properties from your name into a land trust or LLC anytime you want with the help of an attorney. Moving the properties will likely violate the due on sale technically so weigh your tolerance for that risk. Sounds like you are prepared to pay off the mortgage so that may not be a risk for you and I wouldn't actually pay it off until it was necessary.

You will always be in the chain of title but once its moved to an entity it will become less of a factor as time goes by. When and if you get ready to refinance your lender will insist that it be moved back into your name beforehand.

I recommend posing as the property manager instead of the owner. Fewer headaches that way.

Bernard

[Aldo]

My company is a C Corp but, for your issues, I doubt there would be any difference.

Before incorporating I contacted my lenders (very important) to get their blessings for when I placed my castles in the corp. That's pretty much a no-brainer because you're already on the hook for the mortgage. If you're thinking in terms of obtaining new mortgages in the LLC's name, that's not going to happen. Your new entity wouldn't qualify for a mortgage simply because it has no credit history. But, yes, you may get the mortgages, but only on the condition that you sign a personal liability document. By doing that, you will spend a lot of time and money to end up, effectively, where you are now.

The next thing for me to do was to quit-claim the properties from myself to the corp. You could easily do this yourself, but I'd advise using an attorney. I'd rather spend a dollar than make a ten dollar mistake. One of the reasons it's important to use an attorney for this relates to the transfer tax rules which are nearly the same in all states. When quit-claiming a property you own to an entity you own/control, you are effectively, though indirectly, still the owner of that property. Hence, no transfer tax should be due.

Posing as managers primarily relates to your landlord/tenant matters and I see no benefit to doing that for any other purpose. (I'm open to contradiction.) Posing as the property manager is a great landlording tool. Most of my tenants don't have a clue that I'm really their LL. I have separate 'Property Manager' business cards and every piece of paper a tenant would ever see shows me as the property manager or the owner's agent. An example of the benefits to that is when a tenant makes a request that you don't agree with. You simply tell them that you have to check with your boss (you'll find that boss in your mirror). Often I'll agree with the tenant (and later barf), saying that sometimes the boss can be a real jerk. The important thing is that you remain consistent in playing that role and be prepared with an answer when asked why you are the only person the tenant(s) ever see or hears from.

Hope this helps

[Debbie]

Thank you guys.....very helpful....and confused too, LOL....
As for contacting the banker/mortgage to get their "blessing" regarding transferring a property into LLC and/or Land Trust - do they "lose" the paper trail that has your name?
Thanx. Debbie

[Aldo]

Sorry, they don't lose a thing.