Transferring Property Into an LLC: Title and Mortgage Issues
To move property you own into an LLC, you sign and record a deed from yourself to the LLC. The issues to handle first are the mortgage's due-on-sale clause, your title insurance policy, your property insurance, any homestead exemption and leases and contracts tied to the property. Texas has no state transfer tax, so the cost is mainly recording fees and the work of coordinating the lender and insurers.
The steps
- Form the LLC with the Texas Secretary of State and obtain an EIN, operating agreement and bank account.
- Check the mortgage. Read the due-on-sale clause and ask the lender for written consent, if there is a loan.
- Prepare the deed. A special warranty deed or similar from you to the LLC, with a correct legal description.
- Get title and insurance updates. Ask the title company about an endorsement, and update the property insurance.
- Record the deed in the county where the property is located.
- Update records. Appraisal district, utilities, leases, security deposits and tenant notices.
The mortgage
A deed to an LLC is a transfer that can trigger the due-on-sale clause. Federal protections for transfers to a living trust do not generally cover an LLC. Some lenders agree to a transfer with a guaranty or an assumption, and some refuse. If the lender refuses, the choice is to leave title in your name or accept the risk of a call, which may be larger when rates are higher than your loan rate. See holding real estate in an LLC.
Title insurance
Your owner's title policy covers you as the insured. After you deed the property away, coverage may end for the new owner unless an endorsement continues it or the policy terms allow continuation for an entity you control. Ask the title company about an affiliate or continuation endorsement and the cost. The new LLC can also buy a new policy, but that costs more and resets the policy date.
Homestead and taxes
- An LLC cannot hold a homestead. Do not transfer your residence into an LLC.
- For rental property, the appraisal district may need an updated owner's name, and any exemptions based on your personal ownership will end.
- Texas does not reassess property when ownership changes, but appraisals are updated annually.
- Income tax treatment is generally unchanged for a single-member LLC.
Insurance and contracts
- Name the LLC as the insured under the property and liability policies.
- Assign leases and notify tenants where required.
- Move security deposits to the LLC's account, as the lease and law require.
- Update vendor and management contracts.
See protecting rental property from lawsuits and deed types.
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Book Free ConsultationFrequently asked questions
Is there a transfer tax in Texas?
No. Texas has no state real estate transfer tax, though recording fees apply.
Will a deed to my LLC void my title insurance?
Coverage may not carry over without an endorsement. Ask the title company before you record.
Can I deed my house to an LLC?
A residence loses homestead protection and tax exemption if held by an LLC, so it is generally a poor idea.
Should I tell my tenants?
Yes. Leases and deposits move to the LLC, and tenants should know where to pay rent and who the landlord is.