Frequently Asked Questions
Will my tenants have to sign new leases if I put my property into an LLC?
If your leases have an assignment clause, you do not have to get new signatures. Otherwise, you may need to get new signatures, or otherwise set up a management agreement. Your lawyer can help you determine the right solution.
Will it cause problems with my mortgage?
Before transferring a property to an LLC, make sure to read your mortgage. Almost all of the time, they contain a “due on sale clause” or “acceleration” clause. This means that the lender can call in the loan as due-in-full when you transfer it. However, many federally-backed loans cannot be accelerated if you are transferring to an LLC you own. For example, Sallie Mae prohibits acceleration to an LLC owned entirely by you, under most circumstances. If you are in doubt, your lawyer can let you know if a transfer would violate a mortgage or a restriction, such as an owner-occupant requirement.
Will I need to form an LLC to transfer my property?
If you do not have an LLC, your lawyer can help you create one. If you have an existing LLC, then you should put some thought into whether you should put your real estate into it or create a separate company. We can help you with forming an LLC if you require one.
I am investing with other people, do we need an Operating Agreement?
If you have a Limited Liability Company, then you absolutely should have an Operating Agreement! Think of it like the constitution of your company. You set the rules for joining, leaving, voting on leaders, and changing the document itself. Your Articles of Organization just prove that the Company exists. An Operating Agreement sets its rules. Banks and lenders insist on seeing an Operating Agreement before they lend, so you should create one if you do not already have one established.
If you are considering putting a rental property into your LLC, give us a call. If a transfer is the right decision for you, we can help you establish an LLC and create a deed to transfer the property. This typically takes two business days and we can let you know the entire cost, including all of the county taxes paid, upfront.