Buying with Partners/ LLC

4 Replies

Hello,

I am looking to purchase a 3 family with 2 partners that we would be financing. This would be our first property together. My question is what are the pros/cons of buying it through an LLC right away...or buying it under our names at first and then switching to an LLC?

Thanks!

Chris

when you get into a partnership if your not structured properly and your partners have some other issues that could affect your property. Also I think depending on the state that your in changing it later might trigger land transfer fees again, and from what I've seen on here some say the bank may call your mortgage due.

Originally posted by @Marc Dupuis :

Chris

when you get into a partnership if your not structured properly and your partners have some other issues that could affect your property. Also I think depending on the state that your in changing it later might trigger land transfer fees again, and from what I've seen on here some say the bank may call your mortgage due.

Thanks Marc! It seems the only way to do it might be through a commercial lender

in my opinion using an LLC isn't about the lending piece it's about the liability piece, making sure that a law suits both from future tenants don't affect the rest of your holdings as well as if one of your partners gets sued it won't affect your share of that partnership! the lending piece is pretty straightforward.

It's certainly much cleaner to not have to change the ownership structure on the deed 10 minutes after you buy it.  Lenders don't like it and it can also mess up your insurance.  So, you're sitting there with your 2 buddies.  You change the insurance so the owners and beneficiaries match again, who tells your lender and your lender calls your loan.  Perfect!

However you structure the ownership, with partners I would have a strong operating agreement or JV agreement that spells out exactly what happens in case of all the Ds: Death, divorce, disinterest, drug use, default, etc. Prepare for the worst even though we all hope for the best, of course. You don't want to be sitting in a partnership with your buddie's angry ex-wife 10 years from now! "The only ship not meant to sale is a partnership" they say.

I had my operating agreement drawn up by a competent RE attorney.  I don't always recommend one, but I would definitely get legal counsel here.  Good luck @Chris Daliani !