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Should I quit claim deed my Michigan rental property into my single member LLC?

Livonia, MI |

I have a SFH in Wayne County, Michigan which I've owned for 8-9 years. I lived in the home the first 4 years, but it's been a rental for the last 4-5 years. I still have a mortgage and the property is still listed as owner occupied. They only thing I've changed on the property is the insurance, switched to a rental property with umbrella coverage. I've been living in Chicago and my CPA/Attorney had me create an LLC for the property this past year. Now he's urging me to transfer the deed into the LLC. I'm wondering if this is necessary? Will it cause other problems if I transfer?

Attorney Answers 3

Posted

Switching title to the LLC could be a breach of the mortgage and require you to remortgage. Although it you have sufficient equity and keep the payments up to date this is unlikely.

It will also be a heads up to the Local Taxing Authorities that it is not owner occupied so the property taxes could double if its currently "homesteaded" for property tax reasons. Please take note that if its "homesteaded" you are subject to interest and penalties for all of the last 4-5 years of unpaid property taxes at the non-homestead rate.

You could also be renting it illegally without a rental license.

The above said, if you switch it to the LLC, withdraw the homestead tax exemption, get a rental license... you may be able to go forward and after several years the taxing authorities may not realize it should have been homesteaded for all those years and you could get a break.

Please note that I answered this question with general knowlege of the law and with limited disclosure from you, my answer does not create an attorney-client relationship and I cannot be held responsible for how you, the asker, use the information provided. If you want to contact me directly and retain my services you may through my listing on this site or at 248-901-0750 or james@weineresq.com.

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Asker

Posted

It is currently homesteaded. This is a first that I am hearing about a rental license. Where is this filed? I am aware of increased taxes and would be fine with that moving forward. What is involved in a quit claim deed, how do I proceed with the process?

James T. Weiner

James T. Weiner

Posted

Not much is involved in a quit claim deed. it can be a single page properly drafted and a $17-20 filing fee. A rental license is another question.. it usually requires an application, inspection (that you or a representative have to accompany the inspector), repairs (if not up to "code") and re-inspection.. costs usually about $100-200 per year in fees plus the cost of local representation. Sometimes they require a LOCAL contact and/or power of attorney. It all depends upon the local municipality's rental ordinance. (some do not require it but most do) Actually, I am the local representative for several rental homes in A2 area for a friend who had to move out of state for a job (so I do not charge much to her) so Call me 248-901-0750 if you want to know more.

Posted

There are numerous factors that must be considered. For example, your mortgage may be called in for 100% payment, there could be estate and probate tax consequences etc. Generally speaking such a transfer can be done but not without considering the possible legal consequences. You should contact an attorney for direction.

So there is no misunderstanding, this answer does not create an attorney/client relationship and you cannot presume that I am your lawyer or that my advice can be relied upon in any way other than for information only. You will not become my client unless and until you retain me.

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Posted

With the warnings issued by the other answerers, Yes!

This is not legal advice. I am not your lawyer. You are not my client. You cannot rely on my response to your question. My response to your question is probably worth exactly what you paid for it. You don't get to sue me for anything. If you'd like to sue me, well you have to hire me first. Here's how you can hire me! #1 Call: 1-888-463-2843 #2 Email: david@davidcarrierlaw.com #3 See me on TV! www.woodtv.com - go to the Ask the Expert tab! #4 Listen to my radio show (2 full hours every week!) www.woodradio.com - go to the podcast section.

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