Legal Question in Real Estate Law in Pennsylvania

Re: Rental property: create as business

Taking title to investment properties in the name of a corporation or LLC to insulate yourself from personal liability is an option.

If there are mortgages on the properties, you cannot just change title without first getting written consent of the mortgage holder. This would probably trigger a "due on sale" default leading to acceleration of the debt (the lender would call, or demand repayment, of the full amount of the loan).

Also, when you purchase new properties, the lender will want to know the financial health of the owner/borrower. Usually, lenders will want the personal signatures of the people who own the company, which will still put your credit at risk.

In addition, it is essential to adequately insure each property and the owner company for liability as well as property/casualty risks. Owners who try to insulate their personal assets by using another entity or company as the legal owner of their investment property, without adequately insuring and/or capitalizing (funding) the legal owner do put their personal assets at risk. Courts will look past the legal owner in such cases and place liability on the individual owners of the company.