Changing the name on a house title

A lot of people set up LLC’s when they have rentals like 123Main LLC. My understanding is the LLC owns the house but the mortgage is in my name and I know lenders do not like it when the mortgage and titles are in different names. So how does that work?

Second question. I’m assuming the answer to the first question has something to do with the fact the me and my LLC are really two descriptions of the same entity (God I sound like a sovereign citizen) but what if I start an S Corporation which is the owner of all of the separate LLCs? For example SaintCad Slumlord Inc. forms 123Main LLC and 9876Oak LLC and 2357Garfield LLC. Any difference from the first answer?

To begin with, rentals are not usually mortgaged. At least, not single-family dwellings. It’s entirely up to the lender to determine what match or proof of “sameness” is needed for a mortgage in that or any other situation. You’re right in that they prefer identical names and identities on both property title and mortgage.

I would imagine if anything they would leave mortgage and ownership with the actual owner then have the LLC lease the home for $X, then in turn the LLC leases the home to customer for $x+amount

That way a lawsuit against the landlord (slumlord LLC) can hopefully not blow back to the owners or only allow a suit to bankrupt the LLC but not directly hit the owners. As the LLC does not own the asset and a disagreement (assuming not a criminal act) should stop with the LLC.
IANAL and I am probably oversimplifying but when I was renting a house it was suggested I do something like this.

Since this is a legal question it should be moved to IMHO.

There is a whole thing called “piercing the corporate veil”, which you should be well aware of:

We have a vacation condo and it has a mortgage on it (we put down 40%). The LLC owns the condo and it makes the mortgage payment. The rental income funds the mortgage payment. The bank is perfectly happy with the arrangement. We live in Montana, if that matters.

The bank may also require the owners other real estate be used as security… this can work to keep the interest rate and fees and other costs low…

I fail to see what protection the LLC provides if the mortgage is not in the LLC’s name?:smack:

Agree with that

I’m not sure, but going to guess he thinks taxes.

I don’t get how the OP got this far unless the OP set up all these entities yourself. Any accountant or lawyer would surely have given you the whole corporate veil spiel referred to by PastTense

The LLC only owns the house if their name is on the deed. Whatever name is on the deed is the owner of the house. A mortgage is going to be an agreement between a bank (usually) and a borrower where the borrow puts up the property as collateral for the loan in case of default. I might not be using these terms in their exact 100% legal form, but the general gist is that you need to have an interest in the property in order for you to get a loan on it.

I’m not that up on LLCs, but I believe they pretty much have similar rules as S and C corps do for the purposes of things like commingling assets and corporate veil.

If one name is on the deed - only one entity owns that property. It is either you OR the LLC. If the LLC owns it - then you do not - and vice versa. You own shares (or whatever the equivalent is for an LLC) or have interest in the LLC. The LLC would the own the property.

Any mortgage for the property would have to be in the name of the entity on the deed - in some cases - like with 40% equity listed above or good credit or other relationship with the bank - the bank will make a loan that only puts the LLC on the hook. Sometimes they will ask that you also sign as being personally responsible for the loan.

Now maybe banks have varying procedures that don’t follow normal ways of doing things, but I’ve always been told to be very careful to avoid any appearance that my personal affairs and business affairs mix.

Your LLC could have more than one owner. I don’t think you can do what you are trying to do - anymore than I can try and go rent office space for as I own shares in them (granted mine would be outright fraud), but from the banks point of view - how do they know you own 100% of LLCX?

If you want to get a mortgage and the property is to be titled as an LLC - you have it get in the LLCs name - you may or may not have to sign something making yourself personally liable.

Maybe there is some new (or even old) type loan I am not familiar with - in the age of NINJA loans and CDOs - I suppose anything is possible.

Asset protection strategies don’t protect assets against known, secured creditors like banks. They are generally established to offer protection against potential unknown and unsecured potential creditors.

The only person who can grant a mortgage over blackacre is the owner of blackacre. Let’s call him Owner.

However, there’s no reason why Owner can’t grant a mortgage over blackacre to secure a loan to a third party. (Invariably, a third party connected to Owner; Owner’s not running a charity here.) Let’s call the third party Joe.

Generally, the bank will be a bit more comfortable with a loan to Owner and Joe jointly, secured by a mortgage granted by Owner, than it is with loan to Joe alone, supported by a mortgage granted by Owner. So that’s the way the transaction will be documented. But in fact, with Owner’s agreement, the loan proceeds are received and applied by Joe. That’s a matter between Joe and the Owner; the bank doesn’t care.

For the record, I havn’t done this since I don’t own property. I just phased the scenario in the first person. Here is just one of many examples on the web that just assume you put your property in an LLC just like that. No talk about mortgages and whatnot.

IANAL IANAAccountant, but…
The owner would authorize a mortgage on the property, I assume.
Therefore, the LLC has title and has a mortgage.
From what I’ve heard from others who have small businesses, etc. - just because the company owns and wants a loan/mortgage, does not mean the bank will say yes. Usually, they want something more substantial, and the owner personally puts himself and his assets on the line by co-signing. This is no different than when parents co-sign for a car loan for Junior. If Junior (or the LLC) says “sorry, I can’t pay” then the bank can go after the co-signer(s) for the balance.

I don’t understand the concept of the owner’s name on the title personally and the LLC leasing the property to re-lease. IANAL again, but… It would seem to me that the owner personally might still be liable (as ultimate owner) for shortcomings like failing to shovel snow on sidewalk, allowing an explosive gas leak to happen, etc. The ideal would be for everything to belong to the LLC, except the owner may have co-signed the mortgage. Thus, in the event of a horrible tragedy where the house falls down on someone, say, absent any veil piercings, the only personal liability might be the balance of the mortgage a co-signer. As I understand it, that is the whole purpose of LLC.