What advisor(s) should I see when co-inheriting rental property?

[Jeremy Sicarro]

My wife will be inheriting a 50% ownership (her sister the other half) of about 60 out-of-state rental units in the very near future. We all want to keep the properties and continue running the business and so I'm trying to educate myself as rapidly as I can (thank you BP!) since none of us have experience as real estate investors. Right now there are two broad areas that I haven't been able to find a great deal of info on:

1. What specific types of advisors we should be talking with? Obviously we should be setting up relationships with an attorney and a CPA, but are there folks in those fields who specialize in dealing with this type of issue, where two parties are inheriting and co-owning rental property and the attendant company?

2. Has anyone here on the forums gone through a similar experience? What are the pitfalls, points of stress, etc. that we might be likely to run into? My wife and sister-in-law will be going through a lot of emotional turmoil at the time this all takes place, and so I'm preparing to be the one who handles the business side of things and I'm trying to learn as much as I can ahead of time so we can not only handle their dad's legacy responsibly, but also grow it over time.

Thanks for your help!

[Leon D.]

I've been through it, and it can be a NIGHTMARE. Don't rely on Joe Schmoe attorney. Find yourself a good probate/estate attorney, and make sure he brings in guys from tax, corporate, and real estate as appropriate. He or she will also have a relationship or recommendations for a CPA to handle anything that needed on that end. 

Here are a bunch of questions for you to answer for yourself, to gauge how prepared you are for the transition:

1) You say "we want to keep the properties," but what about the sister? Does she want to keep them, too?

2) Will you take 30 units and the sister the other 30, and spin off a new company (so each of you can handle your 30 as you see fit)? Or will you each have an evenly split interest of shares in the entity that owns them all?

3) Will the death and transfer of ownership trigger any default clauses in any loans that may be outstanding?

4) What state is the owning entity (if there is one) incorporated in? Where are you and the sister? Is the owning entity a single-member LLC or a corporation (the tax implications are wildly different)?

5) You each have 50%, but who has management authority? That can't be split; what happens when they disagree, which WILL happen.

6) Have you reviewed all the corporate/loan/management documents to make sure they are current, accurate, and complete?

7) When was the last appraisal done?

8) Were any of these properties part of a 1031 exchange?

Be as prepared as you can possibly be, with as many of these answers (and more) that you can get. Good luck.