forming an llc with a mortgage?

Question

I own 3 rental properties , bought them under my name all three have mortgages . I recently formed 3 llc's 1 for each property .The lawyer i used told me i don't have to notify the banks of this change . is this accurate ?

Answer 1

Sure it's accurate, you don't have to notify the banks.

But as you may already know, they'll be in touch with you.

Banks will call the notes due and payable immediately if they find your properties in corp or trust. It is not the agreement that they have with you when they lent you the money. In all of those lengthy documents you signed you agreed to not do anythingto hinder their ability to foreclose on you for lack of payment. This is a breach of your contractual duties. But don't panic!! Most banks will send you an accelleration document telling you that you must pay all now. Just call them and exclaim your ignorance and tell them you were just kidding, you'll take them out of the llc. Then take them out and put them back in.
They may think that the second time that they see that it's a mistake from the first time. Of course if they catch you, your innocent story won't work a second time.
No bank that I know of will lend you money and let you secure your property away from their ability to foreclose for nonpayment.


Best of luck,

Answer 2

Disclosure is never a bad thing. Feel free to talk to your bank about it before hand. As a few notes on the subject:
1. You definitly do not need more than 1 LLC. If you had 100 properties, splitting them up into 5-10 LLCs might be wise, but 1 property per company is crazy.
2. I have gotten a loan with the title in the name of the LLC (but financing in my name also). So, don't think that you have to title it in your name to get financing.
3. I have been told by bank representatives to close in my name and then quit claim the deed over to my LLC. According to the rep, they do not consider it a sale if it is a quit claim deed, but they do if it is a warranty deed. Note: I have not done this, nor checked with a lawyer. My guess is that they could (theoretically) call the loan due. They likely won't because they wan the business; and if they do, it is not the end of the world, you'll have to refi; see #2 above, but that's it, and you'll have 90 days to do it.
4. Good luck, and get yourself a new lawyer.

Answer 3

What I am trying to figure out is how you let this attorney talk you into forming 3 LLC to put three different properties in.

What was the purpose of forming the LLC? I formed a corp to put my rentals in so I could protect my personal residence and other personal property and cash. I did that with one corporation.

The corporation is strong and continue to grow because I add other properties thus making the corporation wealth driven, I got bank cards for the corporation because the corporation is strong.

I find that the corporation is normally not sued because most individuals will settle for under $4,000.

The paper work and bookkeeping for your 3 LLC must be a tremendous task to say the least. By the time you get property #15 most of your money will be going to the state to pay for all the LLC's you have formed.

You need not tell the bank that you have placed the property in a LLC. That is about the only good advice he gave you.

Your LLC will not be able to get refinanced because it will not have enough money in the bank nor can it prove income, so when you prepare for a refinance or 2nd mortgage you will once again be taking the property out of your LLC and placing it back into your name for this purpose.

How much is each LLC worth and what is the income of each LLC? Now what would one LLC be worth and how much income would the one LLC earn during one month.

How much are you paying your tax person for the three LLC, now what would be the price for one LLC with all three houses in it?

I hate attorneys that do this to innocent victims, you need another attorney and someone with business sense instead of trying to earn money from forming LLC or corporations.

Is that the best possible type of corporation for you? Check with your tax preparer.

I hope this has been of some use to you, good luck.

"FIGHT ON"

Answer 4

You need to engage in some serious study before you jump into this, because it is apparent from your question that you don't understand where you are going. Here are a few basic points. 1. You can transfer the property to an LLC by a deed. But if you do this, and if you have a loan on the property, the transfer will almost certainly violate the terms of your mortgage with the lender. 2. Deeding the property to the LLC will not relieve you from liability for the loan on the property, nor will it keep the property out of foreclosure if you don't pay. 3. You might be able to transfer the property to an LLC without creating a problem with your lender if the lender consents to the transfer and the LLC also agrees to be bound by the note and mortgage. The lender will almost certainly continue to require you to continue to be jointly responsible for payment of the note. Don't try to do any of this without help from a lawyer.

Answer 5

No. No. No.

Call the bank and ask them about the lawyer's advice. They will tell you about the contract you signed that says you won't do this. Of course the lawyer wants you to do this. Then he gets to bill you even more when the bank sues to undo the transactions.

If you want to put the properties into LLCs, call the bank and ask if they will allow you to do this. If the answer is no, then don't. They can call in your note. They can sue you. And they'll win.

How about this: you sell the properties and don't tell the lender. Absurd? Well, that's the same thing you're doing when you change ownership to the LLC.

If you want to mess with the lawyer, ask him to clearly put in writing that you don't need to notify the bank. Watch him squirm. You'll know then and there that even he doesn't believe his answer.

Answer 6

Have you put the property ownership (deed) in the LLC's name, or are you leasing your properties to your LLC's (while retaining personal ownership), then subletting from the LLC's to your tenants?

If it's the former, the bank will not permit this, they will call your notes due.