New to Real Estate · MI · Member since 2021 · 54 posts · 13 votes
Good Morning,
I'm working with an investor (family) who owns
raw land within an LLC. We were going to partner together on it where I
build and run a STR on it. Now, moving forward he offered for us to take
it over completely. I want to know is it more cost effective or easier
to purchase the property alone and put it in a mortgage in our name or
purchase the LLC from him that holds the property within it.
Any information is greatly appreciated! This is uncharted territory for both of us.
I would definitely purchase it and do it yourself. I would also purchase the property and not the LLC unless you are a seasoned investor with a good attorney. Purchasing the LLC gives you ownership of the property, but it also opens you up to additional legal exposure since the entity has been active, and there is no way to really know for sure what else they used the LLC for. Many people utilize LLCs for many different ventures because they do not want to go through the hassle of opening another LLC. If this was the case, you risk putting yourself and the property at risk.
Attorney · Las Vegas, NV · Member since 2025 · 69 posts · 91 votes
1y
Hi Shannon,
I would agree with Charles. Purchasing an existing LLC carries the inherent risk of assuming any pre-existing liabilities, which could include undisclosed lawsuits, outstanding debts, or other financial obligations. Before acquiring an LLC, thorough due diligence is crucial to uncover any such potential exposures. This process might involve a comprehensive review of the LLC's financial records, legal history, and operational agreements.
If the potential liabilities are a concern or if a comprehensive due diligence process is not feasible, an alternative strategy would be to directly purchase the desired property and subsequently transfer its ownership into a newly formed LLC. This strategy effectively achieves the goal of holding the property within an LLC structure to achieve asset protection while mitigating the risks associated with acquiring an entity with an unknown liability history.
Note: This information is for educational and informational purposes only and does not constitute legal, tax, or financial advice. No attorney-client, fiduciary, or professional relationship is established through this communication.