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?
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.
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State, Local, and Municipal Law Attorney
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.
Elder Law Attorney
With the warnings issued by the other answerers, Yes!
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