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A wealthy couple bought a $1 mil property to use as Airbnb or wedding venue. They got the mtg in their name and formed the LLC later. Is it important to have the mortgage and insurance in LLC name in order to preserve the liability protection and to take deductions? The LLC cannot get a loan from a lender in its own name. Will this pierce the liability shield, and should the couple in turn file some paperwork that they themselves lend the money to LLC? As it's set up, the mortgage interest cannot be deducted on Form 1065, nor can it be deducted by the couple since investment interest is hardly deductible.
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I'm not a lawyer, but if you have business assets that you want to protect and those assets aren't in the business name, you really don't have the protection you were looking for.
Slava Ukraini!
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I have many clients with LLC rentals. The mortgages are in the client name. Lenders don't like to give mortgages to entities with little financial history. I've wondered for some time whether the LLC is giving any protection. And whether the interest can be deducted on Form 8825 within the LLC partnership (often a husband and wife).
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Did the client set up the LLC themselves? Would think if client used an attorney all those situations would have been addressed. If it were me, I'd tell them to talk to an attorney.
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My attorney - Google - found this article https://www.legalnature.com/guides/how-to-use-an-llc-for-rental-property that says you must change the deed on the property and that might get the lender excited. Possibly the client can refinance their personal home to pay off this rental and use the tracing rules to cover the loan on the rental.
Answers are easy. Questions are hard!
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They need legal help.
Perhaps transfer the real estate to the LLC subject to the mortgage.
Wealthy doesn't mean smart. They should have gotten legal advice from the get go.
The more I know the more I don’t know.
