Moving Your San Antonio Rental Into an LLC: Deed Transfers, Due-on-Sale Risk, and What to Retitle

An LLC does one thing well for a small landlord: it isolates the rental's liability from your personal assets. It does not lower your federal taxes (a single-member LLC is a disregarded entity — same Schedule E), it does not lower your Bexar County property tax bill, and it does not automatically transfer everything attached to the property. If you file a deed to the LLC and stop there, you have created a mess: a house owned by one entity, a loan owed by another, an insurance policy in the wrong name, and a lease that names a landlord who no longer holds title.

Here is what the transfer actually looks like on a Bexar County rental, in the order it has to happen.

Form the LLC correctly before you touch the deed

File a Certificate of Formation with the Texas Secretary of State (Form 205 for a standard LLC, Form 205 with the Series election if you plan to hold multiple properties in separate series). The filing fee is $300. You must name a registered agent with a Texas street address — not a P.O. box, and not the property itself unless you live there. Most single-property owners use a commercial registered agent for around $100–150 per year to keep their home address off public record.

After formation:

• Get an EIN from the IRS (free, online, ten minutes). You need it for the bank account and the tenant's W-9 if the tenant is a business.
• Open a bank account in the LLC's name. Do not commingle. The moment you deposit rent into your personal account, you have handed a plaintiff's lawyer the argument to pierce the veil.
• Draft or buy a company agreement (operating agreement). Texas does not require you to file it, but a lender or title company will ask for it, and it is what proves the LLC is real if someone sues.

Series LLC — worth it or not

Texas is one of the states that allows a Series LLC, where each series holds one property and its liabilities are walled off from the others. For a landlord with three or more Bexar County rentals, a Series LLC is usually cheaper than forming a separate LLC per property. For one rental, it is overkill. Talk to a Texas business attorney before choosing.

The due-on-sale problem is real

Almost every residential mortgage note contains a due-on-sale clause. Transferring title to an LLC is a transfer that triggers it. The federal Garn-St. Germain Act carves out exceptions — most usefully, a transfer into an inter vivos trust where the borrower stays a beneficiary and continues to occupy the property. That exception does not cover investment property, and it does not cover LLCs.

In practice, most servicers on performing loans do not call the note. But "most do not" is not "none will," and the risk is entirely on you. Options in order of safety:

1. Pay off the loan first. Cleanest, obviously not available to most owners.
2. Ask the servicer in writing whether they will consent to a transfer to a single-member LLC where you remain the sole member and guarantor. Some will issue a written non-objection. Get it in writing before you record the deed.
3. Refinance into a commercial or DSCR loan in the LLC's name. Rates are higher (typically 1–2 points over a conventional rate as of recent cycles) but the loan and title match.
4. Transfer anyway and hope. People do this. It works until it doesn't. If rates rise or the servicer changes hands, a called loan means refinancing under duress.

The deed itself

A Special Warranty Deed is the standard instrument in Texas for a transfer between related parties. You warrant title only against claims arising during your ownership, not going back forever. Prepare it (or have a Texas real estate attorney prepare it — this is not a place to use an online template on a leveraged property) and record it with the Bexar County Clerk. Recording fees run about $30 for the first page and $4 for each additional.

After recording:

• Send a copy to your lender's tax and insurance department so escrow disbursements reflect the correct owner of record.
• BCAD will pick up the ownership change automatically from the county records, but confirm the account shows the LLC as owner within the next tax cycle.

The homestead question

If the property is currently your homestead — you live there, you have a Texas homestead exemption under § 11.13 — transferring to an LLC destroys the homestead. LLCs cannot hold homestead. You lose the exemption (typically $100,000 off school district taxable value as of recent cycles), you lose the 10% appraised-value cap, and you lose the constitutional protection against forced sale by unsecured creditors. If the property is already a rental, none of this applies because homestead was gone the day you moved out and rented it.

Retitle the insurance the same week

A landlord policy (DP-3 dwelling fire, or a commercial equivalent) issued in your personal name will not defend the LLC if a tenant sues. Call your carrier and either:

• Change the named insured to the LLC and add yourself as an additional insured, or
• Issue a new policy in the LLC's name with you as an additional insured and personal umbrella carrying over.

Do not skip this. A DP-3 in the wrong name, after a fire or a slip-and-fall lawsuit, is a coverage denial waiting to happen. While you have the agent on the phone, confirm the loss payee matches your lender's current name.

Assign the lease and tell the tenant

The existing lease names you personally as landlord. On the day the deed records, the LLC becomes the owner but is not automatically a party to the lease. Handle it with a short assignment:

• Sign an Assignment of Lease from you to the LLC.
• Send the tenant written notice under the lease's notice provision, identifying the new landlord, the new payee, the new mailing address, and — critically — where to send rent starting next month.
• If you hold a security deposit, transfer it to the LLC's bank account. Under Texas Property Code § 92.105, the new owner is liable for the deposit from the date of the transfer. Document the handoff so you are not chasing this at move-out.
• Reissue any contact info for maintenance requests. The § 92.052 repair duty follows title.

At lease renewal, sign the new lease in the LLC's name from the start.

What most people get wrong

• Filing the deed and stopping. Deed to LLC, mortgage still in personal name, insurance still in personal name, rent still deposited to a personal Chase account. This gives you the worst of both worlds: due-on-sale exposure and zero liability protection because the veil is trivially pierced.
• Assuming Garn-St. Germain protects an LLC transfer. It does not. That exception is for owner-occupied transfers to a living trust. Investor transfers to an LLC are unprotected.
• Transferring a homestead to an LLC to "protect it." You just gave away the exemption, the appraisal cap, and the strongest asset-protection Texas offers. Texas homestead is already close to bulletproof against unsecured creditors — moving it into an LLC weakens protection, not strengthens it.
• Skipping the franchise tax filing. Texas franchise tax has a no-tax-due threshold in the low millions of revenue as of recent cycles, so most single-property LLCs owe zero. You still must file the Public Information Report and the No Tax Due Report annually with the Comptroller by May 15. Miss it and the LLC forfeits its right to sue — including to file an eviction.
• Ignoring BOI reporting. Beneficial Ownership Information reporting under the federal Corporate Transparency Act has been on-again/off-again through court challenges. Check the current FinCEN guidance before your reporting deadline; do not assume last year's rule still applies.
• Using a Warranty Deed instead of a Special Warranty Deed. A general warranty deed to your own LLC exposes you personally to title claims predating your ownership. Special Warranty is the right instrument between related parties.

When it is not worth doing

One rental, low equity, adequate landlord liability limits ($500,000+) plus a personal umbrella of $1–2 million: an LLC adds cost and paperwork without meaningfully changing your risk picture. Insurance is your first line of defense; the LLC is the backstop for a judgment that exceeds coverage. If you have two or more rentals, meaningful equity, or you are actively acquiring, the LLC structure earns its keep.

If you are still in the acquisition phase and want to see what's on the market at prices that pencil as a rental, browse listings and Bexar County neighborhood data on HomeFinder, or list your rental for tenants at /list-your-home once the LLC and lease are properly retitled.