LLC Transfers: The Commercial Standard
3 min read
How Commercial Real Estate Actually Works
Most people don't realize this, but commercial real estate operates on creative finance principles every day.
When a $50 million office building is sold, the deed often doesn't change hands. Instead:
- The property is held by an LLC
- The buyer purchases the LLC's membership interest
- The property stays in the same LLC
- The mortgage stays in place
- Only the ownership of the LLC changes
This is exactly the same structure as residential creative finance - just at a larger scale with more lawyers involved.
Why This Matters
When someone tells sellers creative finance is "unusual" or "risky," remember:
- Billions of dollars of commercial real estate trades this way every year
- Major banks accept this structure for their largest loans
- Sophisticated investors prefer it for tax and liability reasons
- The same legal principles apply to residential properties
The only difference is that commercial buyers have lawyers who understand this, while residential sellers often don't know it's an option.
The LLC Transfer Structure
Property in LLC
The property is held by a Limited Liability Company (or could be transferred into one).
Mortgage in LLC Name
The loan is also in the LLC's name (common for commercial, less common for residential).
Membership Interest Sold
The seller sells their membership interest in the LLC to the buyer.
No Deed Transfer
The deed stays exactly the same - only the owners of the LLC change.
Mortgage Continues
The existing financing remains in place. New owner makes the payments.
Residential Equivalent: The Trust Structure
For residential properties (where mortgages are usually in personal names), we use trusts instead of LLCs:
| Commercial (LLC) | Residential (Trust) |
|---|---|
| Property held by LLC | Property held by Revocable Living Trust |
| Membership interest transferred | Beneficial interest transferred |
| Manager controls property | Trustee controls property |
| Mortgage stays in LLC name | Mortgage stays in seller's name |
| Private transfer | Private transfer |
The principle is identical: transfer control and economic benefit without triggering the mortgage.
Why Banks Accept This
Banks care about one thing: getting paid.
When payments continue on time, banks have no incentive to:
- Investigate ownership changes
- Call loans due
- Create problems for paying borrowers
This is true whether the property is a $50 million office building or a $250,000 single-family home. The bank wants their monthly payment. Period.
The Bottom Line
Creative finance for residential properties uses the exact same principles that commercial real estate has used for decades.
The structures are proven. The legal frameworks exist. The only thing missing is awareness among residential sellers that these options are available to them.
That's why we built this education platform - to bring commercial-level sophistication to everyday homeowners.