Should You Hold Your Nevada Rental Property in an LLC? What to Check Before You Transfer Title

 

Many investors ask whether they should hold a rental property in an LLC.

An LLC may help separate the property from your personal affairs and create a clearer ownership structure. But it is not automatically the right choice for every investor. Moving a property into an LLC can affect your mortgage, title insurance, property insurance, taxes, lease documents, and future refinancing.

For that reason, do not treat this as a simple paperwork exercise.

Before transferring a property, speak with a Nevada real estate attorney, tax professional, title company, insurance agent, and lender. Each can identify issues that apply to your specific situation.

Start With the Risks Before You Transfer

The most important work happens before you sign a new deed.

Check Your Mortgage Documents

Most residential mortgages contain a due-on-sale or due-on-transfer clause. Transferring title from yourself to an LLC could give the lender the right to require payment of the loan balance.

Will the lender actually enforce that clause? Often, lenders do not take action as long as payments remain current. However, that does not mean the risk does not exist.

Do not assume a lender will approve the transfer. Read your loan documents and ask your lender how it handles transfers to a borrower-owned LLC.

Confirm That Title Insurance Will Continue

Do not use a quitclaim deed simply because it appears easy.

The type of deed used can affect title insurance coverage. Before preparing a deed, contact the title company that issued your policy and ask which form of deed, if any, will preserve your coverage.

A Nevada title company or real estate attorney can help determine whether a Grant, Bargain, and Sale Deed or another deed is appropriate for your situation.

Confirm the Transfer-Tax Treatment

Nevada generally imposes real property transfer tax when an interest in real property changes hands. Certain transfers may qualify for an exemption.

For a transfer from an individual to an LLC that the individual owns 100 percent, the applicable exemption is often listed under NRS 375.090(10). However, the exemption depends on the ownership structure and whether beneficial ownership actually remains unchanged.

Do not guess at the exemption code. Have a title company or attorney confirm it before recording the deed. Here is the county’s exemption list.

Consider Future Refinancing

Many lenders want the borrower to hold title personally when refinancing a residential investment loan.

They may require you to transfer the property out of the LLC before the refinance, close the new loan in your personal name, and then decide whether to transfer title back into the LLC afterward.

This can create extra cost, paperwork, and risk. Think through the likely timing of a future refinance before moving the property into an LLC.

A Practical Sequence for Moving a Property Into an LLC

Once your professional advisors confirm that the transfer makes sense, this is the general sequence.

1. Form the LLC

You can set up a Nevada LLC through the Nevada State Business Services site: State of Nevada Business Formation, or you can work with an attorney or other professional.

You will need:

• The LLC’s exact legal name
• A Nevada registered agent
• Articles of Organization filed with the Nevada Secretary of State
• An EIN from the IRS
• An operating agreement
• A dedicated LLC bank account

 

Even a single-member LLC should have an operating agreement. Banks, lenders, title companies, and courts may ask for it. Search “LLC operating agreement” to find a suitable form.

Open a separate bank account in the LLC’s name. Deposit rental income into that account and pay property expenses from it. Do not mix LLC money with personal money. Keeping records separate is part of maintaining the separation you intended to create.

2. Close the Purchase in Your Personal Name, if Necessary

Most investors close a conventional residential loan in their personal name.

After the purchase closes and the original deed records, you may be able to transfer title into your LLC. Do not attempt to change the buyer on the deed during closing without first confirming that the lender, title company, and escrow officer approve the structure.

You can obtain a copy of your existing recorded deed through the Clark County Recorder’s records system.

3. Have the New Deed Prepared

The transfer usually requires two main documents:

The deed.

A Nevada title company or real estate attorney can prepare the correct deed for the transfer. It should include:

• The current owner or owners, exactly as shown on the existing deed. (If you do not have the deed, you can obtain it from this website.)
• The LLC’s exact legal name as the new owner
• The complete legal description
• The Assessor’s Parcel Number
• Mailing instructions for tax statements and the recorded deed
• Properly notarized signatures from the current owner or owners

 

The Declaration of Value.

A Declaration of Value is generally required with a deed presented for recording in Nevada. This is where the claimed real property transfer-tax exemption is identified.

Have the title company or attorney prepare both documents together. The modest cost is usually worthwhile because an incorrect legal description, ownership name, exemption claim, or recording instruction can create problems later.

4. Record the Transfer

Once the deed and Declaration of Value are complete, the documents are recorded with the county recorder where the property is located.

After recording, keep a copy of the recorded deed, Declaration of Value, LLC formation documents, operating agreement, and any lender or title-company correspondence in one permanent file.

Steps to Take After Recording

Recording the deed is not the end of the process.

Update the Insurance Policy

Contact your insurance agent immediately. The LLC should be named correctly on the policy, and you may also need to remain listed in another capacity depending on the lender and insurance carrier. Your lender may also need to remain listed as mortgagee.

Do not assume the existing policy automatically covers the new ownership structure. Confirm the change in writing.

Transfer the Lease and Security Deposit

The property owner named in the lease has changed, so the lease records should reflect that.

Assign the landlord’s interest in the lease and the security deposit to the LLC. Provide the tenant with written notice of the new owner, payment instructions, and the contact information that applies going forward.

Your property manager should also update its management agreement, accounting records, vendor records, and payment instructions.

Confirm Tax-Bill Delivery

Make sure property-tax bills and other official notices still reach the right person.

This is especially important when taxes are not escrowed through a lender. Update the mailing address with the appropriate county office if necessary.

Keep the LLC Current

Nevada LLCs have recurring state filing and business-license requirements. Put the renewal deadline on your calendar and keep the LLC in good standing.

A missed filing can lead to penalties, loss of good standing, and unnecessary work to reinstate the entity later.

Registered-Agent Help for Fernwood Clients

A Nevada LLC needs a Nevada registered agent to receive official mail and notices.

For Fernwood clients, I can serve as the registered agent at no charge. Use the following address on the LLC filing:

[Your LLC Name] / Eric Fernwood
7345 S Durango Dr, #107-102
Las Vegas, NV 89113

Services Clients Have Used

The following professionals and services have been used by clients in the past. They are provided as possible starting points, not as a guarantee or legal recommendation. Confirm current pricing, availability, qualifications, and scope of work directly with them.

Nevada Real Estate Attorney

Szu-Lung Chang, Esq.
Chang Law Group, L.L.C.
Phone: (702) 483-7123
Fax: (855) 933-2655
Email: Szu@CLGLV.com

Deed Preparation and Recording Service

Direct Deeds LLC
Primary Contact: Norma Green
Website: directdeeds.com
Office: (702) 685-0400
Direct: (702) 529-0151
Cell: (702) 292-3473
norma@directsignings.com

The Bottom Line

An LLC can be useful, but it is not just an entity filing followed by a deed transfer.

Before moving a rental property into an LLC, confirm five things:

1. Your lender’s position on the transfer
2. The effect on title insurance
3. The appropriate deed and transfer-tax exemption
4. The insurance changes required after transfer
5. The effect on a future refinance

A title company or Nevada real estate attorney can often coordinate the deed and recording process. That small upfront cost may prevent an expensive mistake later.