Hi I am US investor from the UK. I am looking at purchasing a property in Cleveland Ohio via a land contract. The seller really wants the purchase to be made in my personal name. I explained to him I only invest via my LLC in Ohio ( which I have had for approx 3 years ). The seller has now come back saying he is happy to do the Land Contract in my LLC name and that will be filed with the country to show my interest. However he wants the note ( $20k over 10 years ) to be in my personal name.
I don't know whether this is legal ? also I don't have a personal US bank account so would be difficult to pay personally. Also I'm not really sure what the issue is - he did state initially is that I could just close my company down. I did state I couldn't see that happening and if it did he could surely he could file a court action for land contract forfeiture. He would keep any monthly payments + $15k down payment. Any thoughts or advice would be appreciated. Thanks
@Mark Morris It sounds like they are asking you to personally guarantee the debt. This is signing personally in addition to signing in your legal capacity for the LLC. I definitely agree that you want to purchase the property using a legal entity (for both liability and tax reasons). In essence your company is buying and is obligated to pay but in case your company doesn't pay you are also personally obligated. This means that in addition to going after the property for non-payment they could go after you personally. This potentially could include a deficiency judgement and attaching liens to assets owned personally. I prefer NOT to personally guarantee as it takes away some of the benefits of using an LLC or corporation. However, I have done it in the past when absolutely needed. My guess with this seller is if you stand your ground they will back off that requirement. A 15k down payment is sizable on that size of transaction. I also suggest having docs reviewed by an attorney familiar with Land Contracts and being sure the property notices are recorded evidencing your equitable interest.
Tracy thank you that is great information and very helpful. I've never bought via a Land contract - would the $15k down payment be paid direct to the seller or to a third part attorney / title company ? thanks again
Yes you can have a house in your LLC and the note can be signed personally. I let some of my foreign nationals just sign corporately and not personally. If he wants you to personally guarantee the deal, he may feel the house is not significant collateral for the deal which should worry you about the purchase price.
Honestly, even if you sign personally, I really doubt that you would get sued overseas for such a small amount.
But the question if it is legal... Yes it is.
Hope that helps
Thanks great - really appreciate the info. I’m going to get my attorney to register the land contract once it’s notarised.
@Mark Morris I strongly suggest using a third party attorney or title company to handle the disbursement of funds (like your down payment) and creation of docs. Recording the Land Contract as you mentioned is also suggested. Happy Investing and please let us know how the deal turns out for you!
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