Hi, I bought my first commercial NNN property in South Carolina in 2023. My husband and I own purchased with 2 friends. The 2 friends did not want to create an LLC with all 3 partners prior to purchasing because they wanted to use proceeds from a 1031 exchange. We agreed to create an LLC for all 3 partners after property was purchased. Ownership structure is my husband and I own under our personal names and the 2 friends own under an LLC. The deed, loan docs, registration all included my name, husbands name, and LLC.
I realize now this was a huge mistake to not purchase under an LLC. The friends are unwilling to create and an LLC. What are my options now? Could I create an LLC with my husband and I? What would I need to update / re-file?
@Meena R. - Are u sure there was a 1031 involved? This would require tenancy in common which lenders typically won’t allow
Transferring ownership from personal names to LLC is straight forward with a deed transfer and re-assigning the tenant leases. Your lender needs to approve deed transfer
If there is a loan on the property, the lender may not allow the transfer. I suggest you talk to a real estate transactional attorney licensed in the state where the property is located and get their advice on your options.
I'm surprised they were able to do a 1031 under this structure.
Now that you have the property purchased in the way you did, what are you looking to fix with an LLC that owns the property? Is that worth the trouble trying to convince your partners to change it?
If you both are on the title (you/husband + friends' LLC) you'll both have to agree about whatever disposition. You need to have a heart to heart with them on your needs and plans.