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May 12, 2025We are not loan specialists, financial advisors, CPA, or tax attorneys. The information provided on this blog is for general informational purposes only and should not be construed as financial, legal, or tax advice. Before making any investment or financial decisions, please consult with a qualified CPA, financial advisor, or tax attorney for guidance tailored to your individual situation. For accurate and comprehensive details regarding loans, taxes, or financial matters, always seek advice from a licensed professional or contact the appropriate government agency for official guidance.
- Transferring a rental property into an LLC requires careful planning to avoid taxes, loan risks, and legal pitfalls. Here are some of the things to be talking to your Tax Attorneys, CPA and other relevant professionals about
Key Risks to Avoid
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Taxable Events: Transferring to a LLC may trigger taxable event. Depends on the ownership and many other factors
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Due-on-Sale Clauses: Most mortgages allow lenders to demand full repayment if ownership changes. Exceptions apply if:
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The loan is owned by Fannie Mae or Freddie Mac (use their online tools to verify)
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You may be able to transfer if you retain similar control of the LLC as the current ownership.
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Deed Strategy -
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- Avoid quitclaim deeds: They offer no title guarantees and may void existing title insurance. They also are an indicator that these are related party transaction leading to reduced anonymity.
- Using a warranty deed: Ensures clear ownership transfer and complies with mostly recognized recording requirements
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Property Tax Reassessment
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- Check if the property is automatically tax reassessed by county/jurisdiction each year or its reassessed on sale.
Other options to discuss with your attorney and other professionals
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Land trust: Transfer the property to a trust first, then designate the LLC as the beneficiary to avoid the issues. ( May not be needed in all states. For eg - Florida).
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