We bought a house last fall that we are planning on renting out as a vacation rental.

I've got an LLC set up and we have a rental company that will be handling the renting but on our end, I would like to have the house rented through the LLC for liability purposes.

I contacted the company that has our mortgage on the property and the lady that was helping us seemed really confused but said she thought we'd have to pay the mortgage off to move it to the LLC. I've been told/ know people who have their LLC take over their mortgage and personally guarantee the loan and their lender is ok with it.

I've also had someone suggest that we personally lease the property to the LLC and then the LLC lease the property to the rental company. So the rental company would be paying the LLC and the LLC would pay us.

My question is if we go the route of leasing to the LLC and the LLC leasing to the rental company, does that cover us personally as far as liability goes or do I need to push harder on the mortgage company about swapping it over?

If the "Us to LLC to Rental Company" covers us then that's an easy enough route but if I'd hate for something happen and us get sued personally.

I obviously haven't read the loan docs governing your property, but I can affirmatively say with 100% confidence that there is a "due on sale" clause somewhere in there. That means that if you deed the property into an LLC, it constitutes an event of default enabling the lender to accelerate the note. A non-judicial foreclosure can literally occur within a month after that (assuming you waived demand, presentment, etc). If the lender calls your note, you have a very short window to either pay the loan off in full or refinance which can be impossible in a month's time. Now, a lot of times people do this and their lender never even finds out about it, but what if they do in your case?

All this to say, if you don't consult an attorney first, you could be exposing yourself to huge problems.

Not an attorney, not your attorney. Have seen this many times, and was reputable title attorneys idea. Talk to your own attorney to get blessing!!

One solution is to seed to the LLC, but not record it. This conveys it to the LLC without triggering the technical default requiring payoff.

If there ever was a liability issue, you have an executed deed. If mortgage gets paid off, can record at that point.

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One solution is to seed to the LLC, but not record it. This conveys it to the LLC without triggering the technical default requiring payoff.

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A possible issue that jumps out to me with that suggestion is whether that might constitute fraud on a federally insured financial institution. That suggestion is to try to hide what one is doing from your lender, which is almost certainly a FIFI. That does not pass the smell test. There are a lot of very unique rules concerning federally insured financial institutions.

Caveat emptor.

I completely agree. Over time, this has been run by multiple attorneys, lenders sometimes in the loop, and few CPAs. If those that would be involved are ok with it, as they are giving the advice/defending the action, that is completely different than going rogue and just doing it.

I suspect this also varies by state and that the more distinct the ownership is pre-LLC and post, the more problem you could have.

Good points. If it was me working with those CPAs and attorneys, I'd also make sure that they had factored in and were very familiar with the very unusual and unique laws protecting the FDIC and what constitutes fraud on a FIFI.

Conventional lenders don't like LLCs. I have an LLC for a triplex long term that I used a private lender via Visio Lending. I have a short term rental condo that I was able to talk a regional bank into using the LLC.